MODULE III

Market Infrastructure
Institution: Stock Exchanges
 History
• Indian stock market marks to be one of the oldest stock market in Asia. It
dates back to the close of 18th century when the East India Company used
to transact securities.
• In the 1830s, trading on corporate stocks and shares in Bank and Cotton
presses took place in Bombay.
• Though the trading was broad but the brokers were hardly half dozen
during 1840 and 1850.
• An informal group of 22 stockbrokers began trading under a banyan tree
opposite the Town Hall of Bombay from the mid1850s, each investing a
(then) princely amount of Rs. 1. This banyan tree still stands in the
Horniman Circle Park, Mumbai.
• In 1860, the exchange flourished with 60 brokers.
 History
• In fact the ‘Share Mania’ in India began when the American Civil War broke and the cotton supply
from the US to Europe stopped. Further the brokers increased to 250.
• The informal group of stockbrokers organized themselves as the Native Share and Stockbrokers
Association which, in 1875, was formally organized as the Bombay Stock Exchange (BSE).
• In 1956, the Government of India recognized the Bombay Stock Exchange as the first stock exchange
in the country under the Securities Contracts (Regulation) Act.
• National Stock Exchange of India Ltd. (NSE) was given recognition as a stock exchange under the
Securities Contracts (Regulation) Act, 1956 in April 1993.
• NSE is India’s 1st demutualized stock exchange and was demutualized from the date of its inception.
NSE commenced operations in the Wholesale Debt Market (WDM) segment in June, 1994 and
commenced electronic trading in Capital Market 1st time in India in November, 1994.
• NSE is also instrumental in bringing the dematerialization of trading in India.
• Since the liberalization in 1992, there have been substantial regulatory, structural, institutional and
operational changes in the securities market of the country. These reforms were carried out with
the objective of improving market efficiency, preventing unfair trade practices, and bringing Indian
securities market up to international standards.
 Significance of Stock Exchanges
• Stock exchange is a market place for buying and selling of securities
and ensuring liquidity to them in the interest of the investors.
• The stock exchanges are virtually the nerve center of the capital
market and reflect the health of the country’s economy as a whole.
• Stock exchange as an organized security market provides
marketability and price continuity for shares and helps in fair
evaluation of securities in terms of their intrinsic worth. Thus it helps
orderly flow and distribution of savings between different types of
investments.
 Significance of Stock Exchanges
• Stock markets play significant role in development of an economy.
They facilitate mobilization of funds from small investors & channelize
them into various development needs of various sectors of the
economy.
• This institution performs an important part in the
economic-upliftment of a country, acting as a free market for
securities where prices are determined by the forces of supply and
demand.
• Apart from the above basic function it also assists in mobilizing funds
for the Government and the Industry and to supply a channel for the
investment of savings in the performance of its functions.
 Significance of Stock Exchanges
• The Stock exchanges in India as elsewhere have a vital role to play in
the development of the country in general and industrial growth of
companies in the private sector in particular and helps the
Government to raise internal resources for the implementation of
various development programmes in the public sector.
• As a segment of the capital market it performs an important function
in mobilizing and channelizing resources which remain otherwise
scattered.
• Thus the Stock Exchanges trap the new resources and stimulate a
broad based investment in the capital structure of industries.
 Functions of Stock Exchanges
• Acts as a continuous market for securities: Investors can invest in any securities,
but in case of any risk, they can exit from that security and freshly re-enter into
whichever security they feel as secure.
• Responsible for securities evaluation: The stock price indicates the performance
and stability of the company. Through these investors decide according to their
risk appetite whether to enter or exit or hold. The stock exchange acts as a
regulator for the securities price evaluation for all the listed stocks.
• Mobilizes savings: Most of the public cannot invest the bulk amount in securities,
so they invest in indirect ways such as mutual funds and investment trusts, and
these are mobilized by stock exchanges.
• Enables healthy speculation: Stock exchange encourages businessmen and
provides healthy speculation opportunities to speculate and gain profits from
fluctuations in stock prices.
 Functions of Stock Exchanges
• Protect investors: Stock exchange ensures the protection of the funds of
investors by allowing only genuine companies to be listed in the stock
exchange.
• Ensures liquidity: Banks and some other institutions like Life Insurance
Corporation (LIC) invest their funds into stocks and earn a profit within a
short period and are sold immediately if there is any necessity of funds.
Thus there is an opportunity to liquidate immediately at any time if
required in the stock market.
• Acts as an economic barometer: The country’s economic growth is
measured with the trends in the stock market. An upward trend in the
stock market denotes growth potential and downward trend denotes the
fall in the economy. Hence the stock exchange is called as an economic
barometer as it indicates conditions prevailing in the country.
 Functions of Stock Exchanges
• Exercise vigilance/control on companies: Every company listed on an exchange
must produce their annual reports and an audited balance sheet to the stock
exchange. Such reports being available in public domain promotes transparency.
• Attracts foreign capital: Foreign Institutional Investors (FII) are likely to invest in
developing economy as the rate of returns will be high in developing economies
due to growth opportunities.
• Stock exchanges ensure Safety of Capital and Fair Dealing: The transactions made
in the stock exchange are made available to the public under well defined rules
and regulations abided by laws. This ensures safety and fair dealings for the
average investors.
• Regulate company management: The firms wanting to get their securities listed
must follow certain rules and fulfill certain conditions. Stock exchanges safeguard
the interest of the investors and regulate the company management.
Operations and Trading Mechanism of Stock
Exchanges
• In the Indian securities market various products are trading like equity
shares, warrants, debenture, etc. The trading in the securities of the
company takes place in dematerialized form in India.
• Dematerialization is the process by which physical certificates of an
investor are converted to an equivalent number of securities in
electronic form and credited to the investors account with his
depository participant.
• In electronic trading, order received are matched electronically on a
strict price/time priority and hence cuts down on time, cost and risk
of error as well as on fraud resulting in improved operational
efficiency.
Operations and Trading Mechanism of Stock
Exchanges
• It enables market participants, irrespective of their geographical
locations, to trade with one another simultaneously. It provides full
anonymity by accepting orders, big or small, from brokers without
revealing their identity, thus providing equal access to everybody.
• It also provides a perfect audit trail, which helps to resolve disputes
by logging in the trade execution process in entirety.
• Regulation 40 of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 stipulates that except in case of
transmission or transposition of securities, requests for effecting
transfer of securities shall not be processed unless the securities are
held in the dematerialized form with a depository.
 Operations and Trading Mechanism of Stock
Exchanges
• In accordance with the Rule 9A of The Companies (Prospectus and Allotment of Securities)
Rules, 2014, every unlisted public company shall issue the securities only in
dematerialised form and facilitate dematerialisation of all its existing securities in
accordance with provisions of the Depositories Act, 1996 and regulations made there
under.
• Every unlisted public company making any offer for issue of any securities or buyback of
securities or issue of bonus shares or rights offer shall ensure that before making such
offer, entire holding of securities of its promoters, directors, key managerial personnel has
been demateriarised in accordance with provisions of the Depositories Act, 1996 and
regulations made there under.
• Every holder of securities of an unlisted public company, who intends to transfer such
securities on or after 2nd October, 2018, shall get such securities dematerialised before
the transfer or who subscribes to any securities of an unlisted public company (whether by
way of private placement or bonus shares or rights offer) on or after 2nd October, 2018
shall ensure that all his existing securities are herd in dematerialized form before such
subscription.
 Stock Market Indexes
• An index is used to give information about the price movement of
products in the financial, commodities or any other markets.
• Financial indexes are constructed to measure price movements of
stocks, bonds, T-bills and other forms of investments.
• Stock market indexes are meant to capture the overall behaviour of
equity markets.
• A stock market index is created by selecting a group of stocks that are
representative of the whole market or a specified sector or segment
of the market.
 Stock Market Indexes
• They provide a historical comparison of returns on money invested in
the stock market against other forms of investments such as gold or
debt.
• They can be used as a standard against which to compare the
performance of an equity fund.
• It is a lead indicator of the performance of the overall economy or a
sector of the economy.
• They reflect highly up-to-date information.
 SENSEX
• Sensitive Index or Sensex is the stock market index indicator for the
BSE.
• It is also sometimes referred to as BSE S&P Sensex.
• It was first published in 1986 and is based on market weighed stock
index of 30 companies based on the financial performance.
 NIFTY
• National Stock Exchange Fifty or Nifty is the market indicator of NSE.
• It is a collection of 50 stocks. It is also referred to as Nifty 50.
• It is owned and managed by India Index Services and Products Ltd.
(IISL).
• Nifty is calculated through the Free-Float market capitalization
weighted method. It multiples the Equity capital (expressed in terms
of number of shares outstanding) with a price, to derive the market
capitalization.
 Surveillance Mechanism at Stock Exchanges
• Market surveillance plays a vital role in ensuring market integrity which is the core
objective of regulators.
• Market integrity is achieved through combination of surveillance, inspection, investigation
and enforcement of relevant laws and rules.
• Globally market surveillance is either conducted by the Regulators or Exchanges or both.
• In India, the primary responsibility of market surveillance has been entrusted to Stock
Exchanges and is being closely monitored by SEBI.
• Millions of orders are transmitted electronically every minute and therefore surveillance
mechanisms to detect any irregularities must also be equally developed.
• Exchanges adopt automated surveillance tools that analyze trading patterns and are
installed with a comprehensive alerts management system.
• Market Surveillance is broadly categorized in 2 parts viz, Preventive Surveillance and Post
trade Surveillance.
 Surveillance Mechanism at Stock Exchanges
• Preventive
• Stringent on boarding norms for Trading Members - Stringent net worth, back ground,
viability etc. checks while on boarding Trading Members.
• Index ci‘‘‘‘ircuit filters - It brings coordinated trading halt in all equity and equity
derivative markets at 3 stages of the index movement, either way viz., at 10%, 15% and
20% based on previous day closing index value.
• Trade Execution Range - Orders are matched and trades take place only if the trade price is
within the reference price and execution range.
• Order Value Limitation - Maximum Order Value limit allowed per order.
• Cancel on logout - All outstanding orders are cancelled, if the enabled user logs out.
• Kill switch - All outstanding orders of that trading member are cancelled if trading member
executes kill switch.
• Risk reduction mode - Limits beyond which orders level risk management shall be initiated
instead of trade level
Surveillance Mechanism at Stock Exchanges
• Preventive
• Compulsory close out - Incoming order, if it results in member crossing the margins available with
the exchange, such order will be partially or fully cancelled, as the case may be, and further disallow
the trading member to create fresh positions.
• Capital adequacy check - Refers to monitoring of trading member’s performance and track record,
stringent margin requirements, position limits based on capital, online monitoring of member
positions and automatic disablement from trading when limits are breached.
• Fixed Price Band/Dynamic Price band - Limits applied within which securities shall move; so that
volatility is curbed orderliness is bought about.
• Trade for Trade Settlement - The settlement of scrip’s available in this segment is done on a trade
for trade basis and no netting off is allowed.
• Periodic call auction - Shifting the security form continuous to call auction method.
• Rumour Verfication - Any unannounced news about listed companies is tracked on online basis and
letter seeking clarification is sent to the companies and the reply received is disseminated.
 Surveillance Mechanism at Stock Exchanges
Post trade surveillance
• End of day alert – Alerts generated using statistical tools. The tool
highlights stocks which have behaved abnormally form its past
behaviour.
• Pattern recognition model – Models designed using high end tools
and trading patterns which itself ‘‘‘‘‘‘identifies suspects
involving in unfair trading practice.
• Transaction alerts for member - As part of surveillance obligation of
members the alerts are downloaded to members under 14 different
heads.
 RISK MANAGEMENT
• A number of measures were taken to modernise the stock exchanges in the country. These measures focused on
infrastructure, development, transparency, efficiency, and enhanced investor protection.
• Risk management was further strengthened by implementing a comprehensive system of margins, exposure
limits, and improving the efficiency of clearing and settlement systems through the introduction of settlement
guarantee funds.
• With a view to enhancing ‘‘‘‘‘‘‘‘‘‘‘market safety, SEBI fixed intra-day trading and gross exposure
limits for brokers.
• SEBI continued to maintain a constant interface ‘wiith the stock exchanges on various issues concerning
investor protection, automated market infrastructure and overall improvement in quality of intermediation.
• SEBI also directed its efforts towards encouraging the stock exchanges to become effective as self-regulatory
institutions.
• Automated screen based trading which was introduced in the country through the setting up of the OTCEI and
NSE and subsequently introduced by the BSE had brought about a qualitative improvement in the market and its
transparency.
• Transaction ‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘‘costs and time were also significantly reduced.
During the year several of the smaller exchanges also introduced online screen based trading.
 RISK MANAGEMENT
The key risk management measures initiated by SEBI include-
• Categorization of securities into groups 1, 2 and 3 for imposition of margins based on their liquidity and volatility.
• VaR (value at risk) based margining system.
• Specification of market to market margins
• Specification of Intra-day trading limits and gross exposure limits.
• Real time monitoring of the Intra-day trading limits and Gross Exposure Limits by the Stock Exchanges.
• Specifications of time limits of payment of margins
• Collection of margins on upfront basis.
• Index based market wide circuit breakers.
• Automatic de-activation of trading terminals in case of breach of exposure limits.
• VaR based margining system has been put in place based on the categorization of stocks based on the liquidity of stocks
depending on its impact cost and volatility. It addresses 99% of the risks in the market.
• Additional margins have also been specified to address balance 1% cases
• Collection of margins from institutional clients on T+1 basis.
 Straight through Processing
• Straight-through Processing ("STP") is a mechanism that automates the end-to-end processing of transactions of
the financial instruments. It involves use of a single system to process or control all elements of the work-flow of
a financial transaction, including what is commonly known as the Front, Middle, and Back office, and General
Ledger.
• In other words, STP can be defined as electronically capturing and processing transactions in one pass, from the
point of first ‘deal’ to final settlement.
• In the traditional method, each and every transaction involves costly multiple data re-entry from paper
documents and other sources which are susceptible to errors, discrepancies, delays and possible fraud. Further,
the traditional means and methods of capturing and processing of information such as phone, fax, email etc.
requires human intervention which slows the entire cycle, introduces errors and delays settlement.
• Usage of STP enables orders to be processed, confirmed, cleared and settled in a shorter time period, more cost
effectively and with fewer errors. Apart from compressing the clearing and settlement time, STP also provides a
flexible, cost-effective infrastructure, which enables e-business expansion through real-time processing and
access to enterprise data.
• STP also streamlines back-office activities, leading to fewer failures, lower risks and drastically reduces costs per
transaction. It embraces a set of applications, business processes and standards, which are set to revolutionize
the settlement and processing standards within the capital markets industry.
 Benefits of adopting STP
• Facilitates shortening of the settlement cycle.
• Increases transparency.
• Avoids costly duplication of work and manual intervention
• Reduction in Risks and errors.
• Faster data capturing, processing and report generation.
• Increases the overall efficiencies.
• Makes the market cost effective.
• Better regulation by systematic audit trial.
Securities Contracts (Regulation) Act, 1956
Registration of stock exchange(s)

SECTION 3 SECTION 4 SECTION 5

• APPLICATION • GRANT OF • WITHDRAWAL
FOR RECOGNITION OF
RECOGNITION TO STOCK RECOGNITION
OF STOCK EXCHANGE
EXCHANGE
 Section 3
• Any stock exchange, which is desirous of being recognized, may make an
application in the prescribed manner to the Central Government.
• Every application shall contain such particulars as may be prescribed and
shall be accompanied by a copy of the bye-laws of the stock exchange for
the regulation and control of contracts and also a copy of the rules relating
in general to the constitution of the stock exchange and in particular, to—
• (a) the governing body of such stock exchange, its constitution and powers of
management and the manner in which its business is to be transacted;
• (b) the powers and duties of the office bearers of the stock exchange;
• (c) the admission into the stock exchange of various classes of members, the
qualifications for membership, and the exclusion, suspension, expulsion and
readmission of members therefrom or thereinto;
• (d) the procedure for the registration of partnerships as members of the stock
exchange in cases where the rules provide for such membership; and the
nomination and appointment of authorised representatives and clerks.
 SECTION 4
• If the Central Government is satisfied-
(a) that the rules and bye-laws of a stock exchange applying for registration are in conformity with such conditions
as may be prescribed with a view to ensure fair dealing and to protect investors;
(b) that the stock exchange is willing to comply with any other conditions (including conditions as to the number of
members) which the Central Government, after consultation with the governing body of the stock exchange and
having regard to the area served by the stock exchange and its standing and the nature of the securities dealt with
by its, may impose for the purpose of carrying out the objects of this Act; and
(c) that it would be in the interest of the trade and also in the public interest to grant recognition to the stock
exchange;
it may grant recognition tot he stock exchange.
• Every grant of recognition to a stock exchange shall be published in the Gazette of India and also in the Official
Gazette of the State in which the principal office of the stock exchange is situate, and such recognition shall
have effect as from the date of its publication in the Gazette of India.
• No application for the grant of recognition shall be refused except after giving an opportunity to the stock
exchange concerned to be heard in the matter; and the reasons for such refusal shall be communicated to the
stock exchange in writing.
 Section 5
• Section 5 lays down that if the Central Government is of opinion that the
recognition granted to a stock exchange should in the interest of the trade
or in the public interest, be withdrawn, the Central Government may serve
on the governing body of the stock exchange a written notice that the
Central Government is considering the withdrawal of the recognition for
the reasons stated in the notice and after giving an opportunity to the
governing body to be heard in matter, the Central Govt. may withdraw the
recognition.
• Where the recognized stock exchange has not been corporatized or
demutualised or it fails to submit the scheme ‘‘‘‘‘‘within the
specified time or the scheme has been rejected by SEBI, the recognition
granted to such stock exchange shall stand withdrawn.
• Powers under Section 4 and Section 5 have been delegated to SEBI.
 Demutualization of Stock Exchanges –
Section 4A and 4B
• The Securities Contracts (Regulation) Act, 1956 has defined stock
exchange as
• Any body of individuals, whether incorporated or not, constituted before
corporatization and demutualization under Sections 4A and 4B, or
• a body corporate incorporated under the Companies Act, 2013 whether
under a scheme of corporatization and demutualization or otherwise,
for the purpose of assisting, regulating or controlling the business of buying,
selling or dealing in securities.
Demutualization of Stock Exchanges - Section
4A and 4B
• “corporatisation” means the succession of a recognised stock
exchange, being a body of individuals or a society registered under
the Societies Registration Act, 1860 (21 of 1860), by another stock
exchange, being a company incorporated for the purpose of assisting,
regulating or controlling the business of buying, selling or dealing in
securities carried on by such individuals or society.
• “demutualisation” means the segregation of ownership and
management from the trading rights of the members of a recognised
stock exchange in accordance with a scheme approved by the
Securities and Exchange Board of India.
Demutualization of Stock Exchanges - Section
4A and 4B
• 4A. On and from the appointed date, all recognised stock exchanges (if not
corporatised and demutualised before the appointed date) shall be
corporatised and demutualised in accordance with the provisions
contained in section 4B:
Provided that the SEBI may, if it is satisfied that any recognised stock
exchange was prevented by sufficient cause from being corporatised and
demutualised on or after the appointed date, specify another appointed date
in respect of that recognised stock exchange and such recognised stock
exchange may continue as such before such appointed date.
Explanation.— For the purposes of this section, “appointed date” means the
date which the Securities and Exchange Board of India may, by notification in
the Official Gazette, appoint and different appointed dates may be appointed
for different recognised stock exchanges.
Demutualization of Stock Exchanges - Section
4A and 4B
• 4B. All recognised stock exchanges referred to in section 4A shall, within such time asmay
be specified by the Securities and Exchange Board of India, submit a scheme for
corporatisation and demutualisation for its approval:
• On receipt of the scheme, the Securities and Exchange Board of India may, after making
such enquiry as may be necessary in this behalf and obtaining such further information, if
any, as it may require and if it is satisfied that it would be in the interest of the trade and
also in the public interest, approve the scheme with or without modification.
• No scheme shall be approved by the Securities and Exchange Board of India if the issue of
shares for a lawful consideration or provision of trading rights in lieu of membership card
of the members of a recognised stock exchange or payment of dividends to members have
been proposed out of any reserves or assets of that stock exchange.
• Where the scheme is approved it shall be published immediately by— (a) the Securities
and Exchange Board of India in the Official Gazette; (b) the recognised stock exchange in
such two daily newspapers circulating in India, as may be specified by the Securities and
Exchange Board of India.
 Powers of Central Government

Section 6 - to call for periodical returns or make direct inquires

Section 8 - to direct rules or to make rules
Section 11 - to supersede governing
body of a recognised stock exchange

Section 12 - to suspend business

of recognised stock exchanges

Section 16 - to prohibit
contracts in certain cases
 Powers of Central Government
• 6.Power of Central Government to call for periodical returns or direct inquires to be made.-
• Every recognised stock exchange shall furnish to the Central Government such periodical returns relating to its
affairs as may be prescribed.
• Every recognised stock exchange and every member thereof shall maintain and preserve for such periods not
exceeding five years such books of account, and other documents as the Central Government, after consultation
with the stock exchange concerned, may prescribe in the interest of the trade or in the public interest, and such
books of account, and other documents shall be subject to inspection at all reasonable times by the Central
Government.
• the Central Government, if it is satisfied that it is in the interest of the trade or in the public interest so to do,
may order in writing,-
(a) call upon a recognised stock exchange or any member thereof to furnish in writing such information or
explanation relating to the affairs of the stock exchange or of the member in relation to the stock exchange as the
Central Government may require; or
(b) appoint one or more persons to make an inquiry in the prescribed manner in relation to the affairs of the
governing body of a stock exchange or the affairs of any of the members of the stock exchange in relation to the
stock exchange and submit a report of the result if such inquiry to the Central Government within such time as
may be specified in the order.
 Powers of Central Government
• 8.Power of Central Government to direct rules to be made or to make
rules.-
• Where, after consultation with the governing bodies of stock exchange the
Central Government is of opinion that it is necessary or expedient so to do,
it may, by order in writing together with a statement of the reasons
therefor, direct recognised stock exchanges to make any rules or to amend
any rules already made in respect of all or any of the matters specified in
sub-section (2) of section 3 within a period of six months from the date of
the order.
• If any recognised stock exchange fails or neglects to comply with any order,
the Central Government may make the rules for, or amend the rules made
by, the recognised stock exchange, either in the form proposed in the order
or with such modifications thereof as may be agreed to between the stock
exchange and the Central Government.
 Powers of Central Government
• 11.Power of Central Government to supersede governing body of a
recognised stock exchange.-
• where the Central Government is of opinion that the governing body of
any recognised stock exchange should be superseded, Central
Government may serve on the governing body a written notice that the
Central Government is considering the super session of the governing
body for the reasons specified in the notice and after giving an
opportunity to the governing body to be heard in the matter it may, by
notification in the Official Gazette, declare the governing body of such
stock exchange to be superseded, and may appoint any person or
persons to exercise and perform all the powers and duties of the
governing body, and, where more persons than one are appointed, may
appoint one of such persons to be the chairman and another to be the
vice-chairman thereof.
 Powers of Central Government
• 12.Power to suspend business of recognised stock exchanges.-
• If in the opinion of the Central Government an emergency has risen
and for the purpose of meeting the emergency the Central
Government considers it expedient so to do, it may, by notification in
the Official Gazette direct a recognised stock exchange to suspend
such of its business for such period not exceeding seven days and
subject to such conditions as may be specified in the notification, and,
if, in the opinion of the Central Government, the interest of the trade
or the public interest requires that the period should be extended,
may, by like notification extend the said period from time to time.
 Powers of Central Government
• 16.Power to prohibit contracts in certain cases.-
• If the Central Government is of opinion that it is necessary to prevent
undesirable speculation in specified securities in any State or area, it
may, by notification in the Official Gazette, declare that no person in
the State or area specified in the notification shall, save with the
permission of the Central Government, enter into any contract for the
sale or purchase of any security specified in the notification except to
the extent and in the manner, if any, specified therein.
• All contracts in contravention of this provision shall be illegal.
 Powers of Recognised Stock Exchange to
make rules and bye-laws
• Section 9. Any recognised stock exchange may, subject to the previous
approval of the Central Government, make bye-laws for the regulation and
control of contracts.
• Contracts means for or relating to buying and selling of securities.
• The bye-laws made under this section may specify the bye-laws the
contravention of which shall make a contract entered into otherwise than
in accordance with the bye-laws void and provide that the contravention
of any of the bye-laws shall render the member concerned liable to one or
more of the following punishments, namely:-
• (i) fine;
• (ii) expulsion from membership;
• (iii) suspension from membership for a specified period;
• (iv) any other penalty of a like nature not involving the payment of money.
 Powers of Recognised Stock Exchange to
make rules and bye-laws
• In particular , and without prejudice to the generality of the foregoing power, such bye-laws may provide for-
• the opening and closing of markets and the regulation of the hours of trade;
• the regulation or prohibition of blank transfers;
• the determination and declaration of market rates, including the opening, closing, highest and lowest rates for securities;
• the terms, conditions and incidents of contracts, including the prescription of margin requirements, if any, and conditions relating thereto, and the forms of contracts in
writing;
• the listing of securities on the stock exchange, the inclusion of any security for the purpose of dealings and the suspension or withdrawal of any such securities, and the
suspension or prohibition of trading in any specified securities;
• the method and procedure for the settlement of claims or disputes, including settlement by arbitration;
• the levy and recovery of fees, fines and penalties;
• the regulation of the course of business between parties to contracts in any capacity;
• the fixing of a scale of brokerage and other chargers;
• the making, comparing, settling and closing of bargains;
• the regulation of dealings by members for their own account;
• the separation of the functions of the jobbers and brokers;
• the limitations on the volume of trade done by any individual member in exceptional circumstances;
• the obligation of members to supply such information or explanation and to produce such documents relating to the business as the governing body may require.
 Powers of SEBI

To make or amend
Bye-laws of recognized To issue directions Power to adjudicate To make regulations
stock exchanges (Section (Section 12A) (Section 23 I) (Section 31)
10)
 Powers of SEBI
• Section 10.Power of Central Government to make or amend bye-laws of recognised stock exchanges.-
• Central Government may, either on a request in writing received by it in this behalf from the governing body of
a recognised stock exchange or on its own motion, if it is satisfied after consultation with the governing body of
the stock exchange that it is necessary or expedient so to do and after recording its reasons for so doing, make
bye-laws for all or any of the matters specified in section 9 or amend any bye-laws made by such stock exchange
under that section.
• Where in pursuance of this section any bye-laws have been made or amended, the due-laws so made or
amended shall be published in the Gazette of India and also in the Official Gazette of the State in which the
principal office of the recognised stock exchange is situate, and on the publication thereof in the Gazette of
India, the bye-laws so made or amended shall have effect as if they had been made or amended by the
recognised stock exchange concerned.
• Where the governing body of a recognised stock exchange objects to any bye-laws made or amended under this
section by the Central Government on its own motion, it may, within six months of the publication thereof in
the Gazette of India under sub-section (2) , apply to the Central Government for revision thereof, and the
Central Government may, after giving an opportunity to the governing body of the stock exchange to be heard
in the matter, revise the bye-laws so made or amended, and where any bye-laws so made or amended are
revised as a result of any action taken under this sub-section, the bye-laws so revised shall be published and
shall become effective as provided in sub-section (2).
 Powers of SEBI
• Section 12A
• If, after making or causing to be made an inquiry, the Securities and Exchange
Board of India is satisfied that it is necessary—
• (a) in the interest of investors, or orderly development of securities market;
• (b) to prevent the affairs of any recognised stock exchange or clearing corporation, or such
other agency or person, providing trading or clearing or settlement facility in respect of
securities, being conducted in a manner detrimental to the interests of investors or
securities market; or
• (c) to secure the proper management of any such stock exchange or clearing corporation or
agency or person, referred to in clause (b),
• it may issue such directions, —
• (i) to any stock exchange or clearing corporation or agency or person referred to in clause
(b) or any person or class of persons associated with the securities market; or
• (ii) to any company whose securities are listed or proposed to be listed in a recognised stock
exchange, as may be appropriate in the interests of investors in securities and the securities
market.
 Powers of SEBI
• Section 23I
• The Securities and Exchange Board of India may appoint any officer not below the rank of a Division
Chief of the Securities and Exchange Board of India to be an adjudicating officer for holding an
inquiry in the prescribed manner after giving any person concerned a reasonable opportunity of
being heard for the purpose of imposing any penalty.
• While holding an inquiry, the adjudicating officer shall have power to summon and enforce the
attendance of any person acquainted with the facts and circumstances of the case to give evidence
or to produce any document, which in the opinion of the adjudicating officer, may be useful for or
relevant to the subject-matter of the inquiry and if, on such inquiry, he is satisfied that the person
has failed to comply with the provisions of any of the sections specified in sub-section (1), he may
impose such penalty as he thinks fit in accordance with the provisions of any of those sections.
• The Board may call for and examine the record of any proceedings under this section and if it
considers that the order passed by the adjudicating officer is erroneous to the extent it is not in the
interests of the securities market, it may, after making or causing to be made such inquiry as it
deems necessary, pass an order enhancing the quantum of penalty, if the circumstances of the case
so justify
 Powers of SEBI
• Section 31
• Securities and Exchange Board of India, may, by notification in the Official Gazette,
make regulations consistent with the provisions of this Act and the rules made
thereunder to carry out the purposes of this Act.
• Every regulation made under this Act shall be laid, as soon as may be after it is
made, before each House of Parliament, while it is in session for a total period of
thirty days which may be comprised in one session or in two or more successive
sessions, and if, before the expiry of the session immediately following the session
or the successive sessions aforesaid, both Houses agree in making any
modification in the regulation or both Houses agree that the regulation should not
be made, the regulation shall thereafter have effect only in such modified form or
be of no effect, as the case may be; so, however, that any such modification or
annulment shall be without prejudice to the validity of anything previously done
under that regulation.
 Clearing Corporation and its functions
• Section 8A(1) provides that a recognized stock exchange may with prior
approval of SEBI, transfer of duties and functions of a clearing house to a
clearing corporation, being a company incorporated under the Companies
Act, 2013, for the purpose of
• the periodical settlement of contracts and differences thereunder;
• the delivery of, and payment for, securities;
• Any other matter incidental to or connected with such transfer
Every clearing corporation shall, for the purpose of transfer of the duties and
functions of a clearing house to a clearing corporation, make bye-laws and submit the
same to the SEBI for its approval.
SEBI may on being satisfied that it is in interest of trade and also in the public interest
to transfer the duties and functions of a clearing house to a clearing corporation, grant
approval to the bye-laws submitted to it and approve transfer of the duties and
functions of a clearing house to a clearing corporation.
 Issue of securities to the Public
• Section 17A
• Without prejudice to the provisions contained in this Act or any other law for the time being in
force, no securities shall be offered to the public or listed on any recognised stock exchange unless
the issuer fulfils such eligibility criteria and complies with such other requirements as may be
specified by regulations made by the Securities and Exchange Board of India.
• Every issuer intending to offer the certificates or instruments referred therein to the public shall
make an application, before issuing the offer document to the public, to one or more recognised
stock exchanges for permission for such certificates or instruments to be listed on the stock
exchange or each such stock exchange.
• Where the permission applied for listing has not been granted or refused by the recognised stock
exchanges or any of them, the issuer shall forthwith repay all moneys, if any, received from
applicants in pursuance of the offer document, and if any such money is not repaid within eight
days after the issuer becomes liable to repay it, the issuer and every director or trustee thereof, as
the case may be, who is in default shall, on and from the expiry of the eighth day, be jointly and
severally liable to repay that money with interest at the rate of fifteen per cent. per annum.
 Delisting of securities from recognised stock
exchange
• Section 21A.
• A recognised stock exchange may delist the securities, after recording the reasons
therefor, on any of the ground or grounds as may be prescribed under this Act
• Provided that the securities of a company shall not be delisted unless the
company concerned has been given a reasonable opportunity of being heard.
• A listed company or an aggrieved investor may file an appeal before the Securities
Appellate Tribunal against the decision of the recognised stock exchange delisting
the securities within fifteen days from the date of the decision of the recognised
stock exchange delisting the securities and the provisions of sections 22B to 22E of
this Act, shall apply, as far as may be, to such appeals: Provided that the Securities
Appellate Tribunal may, if it is satisfied that the company was prevented by
sufficient cause from filing
•MODULE IV
 SEBI Act 1992 – Object and establishment
• Object - An Act to provide for the establishment of a SEBI
• to protect the interests of investors in securities and
• to promote the development of, and to regulate, the securities market and for
matters connected therewith or incidental thereto.
• Establishment and Incorporation of Board - Section 3 of the SEBI Act
provides that there shall be a Board by the name of the Securities and
Exchange Board of India (SEBI) established as –
• a body corporate;
• having perpetual succession and a common seal;
• with power to acquire, hold and dispose of property, both movable and immovable;
and
• to contract, and shall, by the said name, sue or be sued;
• The head office of Board shall be at Mumbai.
 SEBI Act 1992 - Members
• Section 4(1) of the SEBI Act provides that the SEBI shall consist of the following members
(appointed by the Central Government), namely:
• (a) a Chairman;
• (b) two members from amongst the officials of the Ministry of the Central Government dealing with
Finance and administration of the Companies Act, 2013;
• (c) one member from amongst the officials of the Reserve Bank;
• (d) five other members of whom at least three shall be the whole-time members, to be appointed by
the Central Government.
• The general superintendence, direction and management of the affairs of the Board shall
vest in a Board of members, which may exercise all powers and do all acts and things
which may be exercised or done by the Board.
• The Chairman and the other members shall be persons of ability, integrity and standing
who have shown capacity in dealing with problems relating to securities market or have
special knowledge or experience of law, finance, economics, accountancy, administration
which is opinion of Central Government, shall be useful to the Board.
 SEBI Act 1992 – Removal of member
• Section 6
• The Central Government shall remove a member from office if he—
• is, or at any time has been, adjudicated as insolvent;
• is of unsound mind and stands so declared by a competent court;
• has been convicted of an offence which, in the opinion of the Central
Government, involves a moral turpitude;
• has, in the opinion of the Central Government, so abused his position as to
render his continuation in office detrimental to the public interest.
Provided that no member shall be removed under this clause unless he
has been given a reasonable opportunity of being heard in the matter
 SEBI Act 1992 - Meetings
• Section 7
• The Board shall meet at such times and places, and shall observe such rules
of procedure in regard to the transaction of business at its meetings
(including quorum at such meetings) as may be provided by regulations.
• The Chairman or, if for any reason, he is unable to attend a meeting of the
Board, any other member chosen by the members present from amongst
themselves at the meeting shall preside at the meeting.
• All questions which come up before any meeting of the Board shall be
decided by a majority votes of the members present and voting, and, in
the event of an equality of votes, the Chairman, or in his absence, the
person presiding, shall have a second or casting vote.
 SEBI ACT, 1992 – Functions of SEBI
• Section 11 – Regulatory Functions
• It shall be the duty of the Board to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market, by such measures as it thinks fit.
• Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide
for—
• regulating the business in stock exchanges and any other securities markets;
• registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of
trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other
intermediaries who may be associated with securities markets in any manner;
• registering and regulating the working of the depositories, participants, custodians of securities, foreign institutional
investors, credit rating agencies and such other intermediaries as the Board may, by notification, specify in this behalf;
• registering and regulating the working of venture capital funds and collective investment schemes, including mutual funds;
• promoting and regulating self-regulatory organisations;
• prohibiting fraudulent and unfair trade practices relating to securities markets;
• promoting investors‘ education and training of intermediaries of securities markets;
• prohibiting insider trading in securities;
• regulating substantial acquisition of shares and take over of companies;
 Functions of SEBI
• calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, mutual funds,
other persons associated with the securities market, intermediaries and self-regulatory organisations in the securities
market;
• calling for information and records from any person including any bank or any other authority or board or corporation
established or constituted by or under any Central or State Act which, in the opinion of the Board, shall be relevant to any
investigation or inquiry by the Board in respect of any transaction in securities;]
• calling for information from, or furnishing information to, other authorities, whether in India or outside India, having
functions similar to those of the Board, in the matters relating to the prevention or detection of violations in respect of
securities laws, subject to the provisions of other laws for the time being in force in this regard: Provided that the Board, for
the purpose of furnishing any information to any authority outside India, may enter into an arrangement or agreement or
understanding with such authority with the prior approval of the Central Government;
• performing such functions and exercising such powers under the provisions of the Securities Contracts (Regulation) Act, 1956
(42 of 1956), as may be delegated to it by the Central Government;
• levying fees or other charges for carrying out the purposes of this section;
• conducting research for the above purposes;
• calling from or furnishing to any such agencies, as may be specified by the Board, such information as may be considered
necessary by it for the efficient discharge of its functions;
• performing such other functions as may be prescribed
• take measures to undertake inspection of any book, or register, or other document or record of any listed public company or
a public company (not being intermediaries referred to in section 12) which intends to get its securities listed on any
recognised stock exchange where the Board has reasonable grounds to believe that such company has been indulging in
insider trading or fraudulent and unfair trade practices relating to securities market.
 Other Functions
• Powers and Enforcement: The SEBI Act grants SEBI wide-ranging powers to carry
out its regulatory functions effectively. These powers include the ability to issue
regulations, guidelines, and circulars, conduct inspections and investigations,
impose penalties and sanctions for violations, and take legal action against entities
engaged in fraudulent or manipulative practices in the securities market.
• Investor Protection: The SEBI Act places a strong emphasis on investor protection.
SEBI is tasked with promoting fair practices and ensuring the integrity and
transparency of the securities market. It establishes mechanisms for addressing
investor, and mandatory disclosures by listed companies.
• Market Intermediaries: The SEBI Act regulates various market intermediaries,
including stockbrokers, sub-brokers, portfolio managers, investment advisers, and
other entities involved in the securities market. It sets out the eligibility criteria,
registration requirements, and code of conduct for these intermediaries to ensure
professionalism and ethical practices in their operations.
 Other Functions
• Prohibition of Insider Trading: The SEBI Act prohibits insider trading,
which involves trading in securities based on non-public,
price-sensitive information. SEBI is responsible for enforcing the
provisions related to insider trading and has the authority to
investigate and penalize those involved in such activities.
• Market Surveillance and Enforcement: The SEBI Act provides for
market surveillance and enforcement mechanisms to ensure
compliance with securities laws and regulations. SEBI has the power
to monitor and supervise the securities market, conduct
investigations, and take appropriate actions to curb market
manipulation, fraud, and other irregularities.
Procedure & Conditions for registration of an
intermediaries
• Section 12 - Registration of stock brokers, sub-brokers, share transfer agents, etc.
• No stock broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar
to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other
intermediary who may be associated with securities market shall buy, sell or deal in securities
except in accordance with the conditions of a certificate of registration obtained from the Board.
• No depository, participant, custodian of securities, foreign institutional investor, credit rating
agency, or any other intermediary associated with the securities market as the Board may by
notification in this behalf specify, shall buy or sell or deal in securities except in accordance with the
conditions of a certificate of registration obtained from the Board
• No person shall sponsor or cause to be sponsored or carry on or caused to be carried on any
venture capital funds or collective investment schemes including mutual funds, unless he obtains a
certificate of registration from the Board.
• The Board has power to suspend or cancel a certificate of registration. Provided that no order shall
be made unless the person concerned has been given a reasonable opportunity of being heard.
 Investigations procedure by the SEBI
• Section 11C – Investigation
• Where the Board has reasonable ground to believe that—
• (a) the transactions in securities are being dealt with in a manner detrimental to the investors or the securities market; or
• (b) any intermediary or any person associated with the securities market has violated any of the provisions of this Act or the
rules or the regulations made or directions issued by the Board thereunder, it may, at any time by order in writing, direct any
person (hereafter in this section referred to as the Investigating Authority) specified in the order to investigate the affairs of
such intermediary or persons associated with the securities market and to report thereon to 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, 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 him or any person authorised 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.
 Investigations procedure by the SEBI
• The Investigating Authority may keep in its custody any books, registers,
other documents and record for six months and thereafter shall return the
same to any intermediary or any person associated with securities market
by whom or on whose behalf the books, registers, other documents and
record are produced : Provided that the Investigating Authority may call for
any book, register, other document and record if they are needed again
• Any person, directed to make an investigation, may examine on oath, any
manager, managing director, officer and other employee of any
intermediary or any person associated with securities market in any
manner, in relation to the affairs of his business and may administer an
oath accordingly and for that purpose may require any of those persons to
appear before it personally.
 Investigations procedure by the SEBI
• If any person fails without reasonable cause or refuses—
• (a) to produce to the Investigating Authority any book, register, other
document and record; or
• (b) to furnish any information; or
• (c) to appear before the Investigating Authority personally when required to
do so or to answer any question which is put to him by the Investigating
Authority in pursuance of that sub-section; or
• (d) to sign the notes of any examination,
he shall be punishable with imprisonment for a term which may extend to one
year, or with fine, which may extend to one crore rupees, or with both, and also
with a further fine which may extend to five lakh rupees for every day after the
first during which the failure or refusal continues.
 Investigations procedure by the SEBI
• Notes of any examination shall be taken down in writing and shall be
read over to, or by, and signed by, the person examined, and may
thereafter be used in evidence against him.
• Where in the course of investigation, the Investigating Authority has
reasonable ground to believe that the books, registers, other
documents and record of, or relating to, any intermediary or any
person associated with securities market in any manner, may be
destroyed, mutilated, altered, falsified or secreted, the Investigating
Authority may make an application to the Magistrate or Judge of such
designated court in Mumbai, as may be notified by the Central
Government, for an order for the seizure of such books, registers,
other documents and record.
 Investigations procedure by the SEBI
• After considering the application and hearing the Investigating Authority, the
Magistrate or Judge of the Designated Court may, by order, authorise the
Investigating Authority –
• (a) to enter, with such assistance, as may be required, the place or places where such
books, registers, other documents and record are kept;
• (b) to search that place or those places in the manner specified in the order; and
• (c ) to seize books, registers, other documents and record, it considers necessary for the
purposes of the investigation.
• Investigating Authority shall keep in its custody the books, registers, other
documents and record seized under this section for such period not later than the
conclusion of the investigation as it considers necessary and thereafter shall
return the same to the company or the other body corporate, or, as the case may
be, to the managing director or the manager or any other person, from whose
custody or power they were seized and inform the Magistrate or Judge of the
Designated Court of such return.
Penalties imposed by the SEBI for various failures,
default, non-disclosure and other offense
• Chapter VIA of the SEBI Act deals with penalties which can be imposed under the
Act for various failures, defaults, non-disclosure and other offences.
Section Contravention Penalty
15A Failure to furnish Penalty of at least 1 lakh rupees but may extend to 1 lakh rupees
information, return, per day during which such failure continues, subject to a
etc. maximum of 1 crore rupees.
15B Failure by any person Penalty of at least 1 lakh rupees but may extend to 1 lakh rupees
to enter into per day during which such failure continues, subject to a
agreement with maximum of 1 crore rupees.
clients.
15C Failure to redress Penalty of at least 1 lakh rupees but may extend to 1 lakh rupees
investors’ grievances. per day during which such failure continues, subject to a
maximum of 1 crore rupees.
15D Certain defaults in Penalty of at least 1 lakh rupees but may extend to 1 lakh rupees
case of mutual funds per day during which such failure continues, subject to a
maximum of 1 crore rupees
Penalties imposed by the SEBI for various failures,
default, non-disclosure and other offense
15E Failure to observe rules and regulations by an Penalty of at least 1 lakh rupees but may
asset management company extend to 1 lakh rupees per day during which
such failure continues, subject to a maximum
of 1 crore rupees.
15EA In case of alternative investment funds, Penalty of at least 1 lakh rupees but may
infrastructure investment trusts and real estate extend to 1 lakh rupees per day during which
investment trusts fails to comply with the such failure continues, subject to a maximum
regulations made by the SEBI or directions issued of 1 crore rupees or 3 times the amount of
by the SEBI. gains made out of such failure, whichever is
higher.
15EB In case investment adviser and research analyst Penalty of at least 1 lakh rupees but may
fails to comply with the regulations made by the extend to 1 lakh rupees per day during which
SEBI or directions issued by the SEBI such failure continues, subject to a maximum
of 1 crore rupees.
15F Default in case of stock brokers.If any stock broker- • Penalty of at least 1 lakh rupees but which may extend
• fails to issue contract notes in the form and manner to 1 crore rupees for which the contract note was required
specified by the stock ‘‘‘exchange of which such to be issued by that broker.
broker is a member

• fails to deliver any security or fails to make payment • Penalty of at least 1 lakh rupees but may extend to 1
of the amount due to the investor in the manner lakh rupees per day during which such failure continues,
within the period specified in the regulations subject to a maximum of 1 crore rupees.

• charges an amount of brokerage which is in excess • penalty of at least 1 lakh rupees but which may extend
of the brokerage specified in the regulations to five times the amount of brokerage charged in excess of
specified brokerage whichever is higher.
15G Insider Trading. If any insider who,— Penalty of at least 10 lakh rupees but which may extend to
• either on his own behalf or on behalf of any other 25 crore rupees or 3 times the amount of profits made out
person, deals in securities of a body corporate listed of insider trading whichever is higher.
on any stock exchange on the basis of any
unpublished price-sensitive information; or
• communicates any unpublished price-sensitive
information to any person, with or without his request
for such information except as required in the
ordinary course of business or under any law; or
• counsels, or procures for any other person to deal in
any securities of any body corporate on the basis of
unpublished price-sensitive information.
15H Non-disclosure of acquisition of shares and takeovers. Penalty of at least 10 lakh rupees but which
may extend to 25 crore rupees or 3 times the
amount of ‘‘‘profits made out of such
failure, whichever is higher.
15HA Fraudulent and unfair trade practices Penalty of at least 5 lakh rupees but which
may extend to 25 crore rupees or 3 times the
amount of profits made out of such failure,
whichever is higher
15HAA Alteration, destruction, etc., of records and failure to protect the Penalty of at least 1 lakh rupees but which
electronic database of Board. may extend to 10 crore rupees or 3 times the
amount of profits made out of such act,
whichever is higher
15HB Contravention where no separate penalty has been provided Penalty of at least 1 lakh rupees but which
may extend to 1 crore rupees
 Securities Appellate Tribunal, Appeals,
Appearance before Securities Appellate Tribunal
• In order to afford proper appellate remedies, Chapter VIB of the SEBI
Act provides for the establishment of the Securities Appellate
Tribunals (SAT) to consider appeals against the SEBI’s orders, or
penalties.
• Section 15K establishes Securities Appellate Tribunals by the Central
Government by notification and specify the matters and places in
relation to which the Securities Appellate Tribunal may exercise
jurisdiction.
 Composition and Qualification
• Section 15L - A Securities Appellate Tribunal shall consist of a Presiding Officer and two
other members, to be appointed, by notification, by the Central Government.
• Section 15M –
• A person shall not be qualified for appointment as the Presiding Officer of the Securities
Appellate Tribunal unless he –
• (a) is a sitting or retired Judge of the Supreme Court or a sitting or retired Chief Justice of a High
Court; or
• (b) is a sitting or retired Judge of a High Court who has completed not less than seven years of
service as a Judge in a High Court.
(1A) The Presiding Officer of the Securities Appellate Tribunal shall be appointed by the Central
Government in consultation with the Chief Justice of India or his nominee.]
• A person shall not be qualified for appointment as member of a Securities Appellate
Tribunal unless he is a person of ability, integrity and standing who has shown capacity in
dealing with problems relating to securities market and has qualification and experience
of corporate law, securities laws, finance, economics or accountancy.
 Tenure
• Section 15N
• The Presiding Officer and every other Member of a Securities
Appellate Tribunal shall hold office for a term of five years from the
date on which he enters upon his office and shall be eligible for
re-appointment.
• No person shall hold office as the Presiding Officer of the Securities
Appellate Tribunal after he has attained the age of sixty-eight years.
• No person shall hold office as a Member of the Securities Appellate
Tribunal after he has attained the age of sixty-two years.
 Resignation and removal
• Section 15Q.
• The Presiding Officer or any other Member of a Securities Appellate Tribunal may,
by notice in writing under his hand addressed to the Central Government, resign
his office: Provided that the Presiding Officer or any other Member shall, unless
he is permitted by the Central Government to relinquish his office sooner,
continue to hold office, until the expiry of three months from the date of receipt
of such notice or until a person duly appointed as his successor enters upon his
office or until the expiry of his term of office, whichever is the earliest.
• Presiding Officer or any other Member of a Securities Appellate Tribunal shall not
be removed from his office except by an order by the Central Government on the
ground of proved misbehaviour or incapacity after an inquiry made by a Judge of
the Supreme Court, in which the Presiding Officer or any other Member
concerned has been informed of the charges against him and given a reasonable
opportunity of being heard in respect of these charges.
 Appeal to the Securities Appellate Tribunal.
• Section 15T.
• any person aggrieved,—
• (a) by an order of the Board made, on and after the commencement of the Securities Laws (Second
Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder; or
• (b) by an order made by an adjudicating officer under this Act, may prefer an appeal to a Securities Appellate
Tribunal having jurisdiction in the matter.
• Every appeal shall be filed within a period of forty-five days from the date on which a copy of the
order made by the Board is received by him and it shall be in such form and be accompanied by
such fee as may be prescribed. SAT may entertain an appeal after the expiry of the said period of
forty-five days if it is satisfied that there was sufficient cause for not filing it within that period.
• On receipt of an appeal, the Securities Appellate Tribunal may, after giving the parties to the appeal,
an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or
setting aside the order appealed against.
• The appeal filed before the Securities Appellate Tribunal shall be dealt with by it as expeditiously as
possible and endeavour shall be made by it to dispose of the appeal finally within six months from
the date of receipt of the appeal.
 Procedure and powers of the Securities
Appellate Tribunal.
• Section 15U.
• The Securities Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil
Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice.
• The Securities Appellate Tribunal shall have, for the purposes of discharging their functions under
this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of
1908), while trying a suit, in respect of the following matters, namely :—
• (a) summoning and enforcing the attendance of any person and examining him on oath;
• (b) requiring the discovery and production of documents;
• (c) receiving evidence on affidavits;
• (d) issuing commissions for the examination of witnesses or documents;
• (e) reviewing its decisions;
• (f) dismissing an application for default or deciding it ex parte ;
• (g) setting aside any order of dismissal of any application for default or any order passed by it ex parte ;
• (h) any other matter which may be prescribed.
 No jurisdiction of civil court
• Section 15Y
• No civil court shall have jurisdiction to entertain any suit or
proceeding in respect of any matter which an adjudicating officer
appointed under this Act or a Securities Appellate Tribunal
constituted under this Act is empowered by or under this Act to
determine and no injunction shall be granted by any court or other
authority in respect of any action taken or to be taken in pursuance of
any power conferred by or under this Act.
 Appeal
• Section 15Z
• Any person aggrieved by any decision or order of the Securities
Appellate Tribunal may file an appeal to the Supreme Court within
sixty days from the date of communication of the decision or order of
the Securities Appellate Tribunal to him on any question of law arising
out of such order.
• Provided that the Supreme Court may, if it is satisfied that the
applicant was prevented by sufficient cause from filing the appeal
within the said period, allow it to be filed within a further period not
exceeding sixty days.