Primary capital market scenario in India, primary market intermediaries, primary market activities, methods of raising resources from primary market; secondary market scenario in India, reforms in secondary market, organization and management, trading and settlement, listing of securities, stock market index, steps taken by SEBI to increase liquidity in the stock market.

1. UNIT-II

2. PRIMARY MARKET
Primary Market also known as NEW ISSUES MARKET
(NIM) is a market for raising fresh capital in the form of
shares and debentures. Corporate enterprises, which are
desirous of raising capital funds through the issue of
securities , approach the primary market.Issuers
exchange financial securities for long term funds. The
primary market allows for the formation of capital in the
country and the accelerated industrial and economic
development.
It refers to the set-up which helps the industry to raise the
funds by issuing different types of securities.

3. PRIMARY MARKET

4. Modes of raising capital
 Public issue- Where the securities are issued to the members of the general public, it takes
the form of “Public Issue”. It is the most popular method of raising long term funds.When a
company makes public issue of shares for the first time, it is called Initial public Offer.The
company has to appoint underwriters in order to guarantee the minimum subscription.An
underwriter is generally an investment banking company.The underwriter agrees to pay the
certain price and buy a minimum number of shares, if they are not subscribed by the public.
 E-IPO- The companies are now allowed to issue capital to the public through the on-line
system of the stock exchanges. For making such on-line issues, the companies should
comply with the provisions contained in Chapter 11A of SEBI( Disclosure and Investor
Protection) Guidelines, 2000.
 BOOK BUILDING/PRICE BAND
It is a process used for marketing a public offer of equity shares of a company.
Book building is a process wherein the issue price of a security is determined by the demand
and supply forces in the capital market
The Price at which securities will be allotted is not known in advance to the investor. Only an
indicative price range is known. (Also called price band and it should not be more than 20%
of the floor price).
 Rights Issue- Where the issue of equity shares of a body corporate is made to the existing
shareholders as a pre-emptive right, it takes the form of “right issue”. Under this method,
additional securities are offered for subscription to the existing shareholders.
 Private Placement- Where the shares of a body corporate are sold to a group of small
investors, it takes the form of “private placement”.

5. Public Issues
 An unlisted company has to satisfy the following criteria to be eligible to make a public issue
 Pre-issue networth of the co. should not be less than Rs.1 crore in last 3 out of last 5 years with minimum
networth to be met during immediately preceding 2 years
 Track record of distributable profits for at least three (3) out of immediately preceding five (5) years
 The issue size (i.e. offer through offer document + firm allotment + promoters’ contribution through the offer
document) shall not exceed five (5) times its pre-issue networth.
 In case an unlisted company does not satisfy any of the above criterions, it can come out with a public issue only
through the Book-Building process. In the Book Building process the company has to compulsorily allot at least
sixty percent (50%) of the issue size to the Qualified Institutional Buyers (QIB’s), failing which the full
subscription monies shall be refunded.
Initial Public Offer
 In case of an Initial Public Offer (IPO) i.e. public issue by unlisted company, the promoters have to necessarily
offer at least 20% of the post issue capital.
 In case of public issues by listed companies, the promoters shall participate either to the extent of 20% of the
proposed issue or ensure post-issue share holding to the extent of 20% of the post-issue capital.
 In case of any issue of capital to the public the minimum contribution of promoters shall be locked in for a
period of 3 years, both for an IPO and Public Issue by listed companies.
 In case of an IPO, if the promoters’ contribution in the proposed issue exceeds the required minimum
contribution, such excess contribution shall also be locked in for a period of one year.
 In case of a public issue by a listed company, participation by promoters in the proposed public issue in excess
of the required minimum percentage shall also be locked-in for a period of one year as per the lock-in provisions
as specified in Guidelines on Preferential issue.
 paid up share capital prior to IPO and shares issued on a firm allotment basis along with issue shall be locked-in
for a period of one year from the date of allotment in public issue.
 In case of over-subscription in a fixed price issue the allotment is done in marketable lots, on a proportionate
basis
 In case of a book building issue, allotment to Qualified Institutional Buyers and Non-Institutional buyers are
done on a discretionary basis. Allotment to retail investors is done on a proportionate basis
 all steps for completion of the necessary formalities for listing and commencement of trading at all stock
exchanges where the securities are to be listed are taken within 7 working days of finalization of basis of
allotment.

6. Features of Primary Market
 This is the market for new long term equity capital.
 The primary market is the market where the securities are sold for
the first time.
 In a primary issue, the securities are issued by the company directly
to investors.
 The company receives the money and issues new security
certificates to the investors.
 Primary issues are used by companies for the purpose of setting up
new business or for expanding or modernizing the existing business.
 The new issue market does not include certain other sources of new
long term external finance
 Borrowers in the new issue market may be raising capital for
converting private capital into public capital; this is known as "going
public."

7. The need for primary market
 To raise funds for certain purpose.
 To create market for new issues of securities.
 To establish the magnitude of the market.
 To mobilize Resource the economy.
 For overall development of companies.

8. Benefits of Primary Market
 Household Savings
 Global Investments
 Sale of Government Securities
 Primary Market Participants
 Marker Risk

10. FUNCTIONS
 Origination- In primary market, origination means to investigate, evaluate and procedure
new project proposals. It initiates before an issue is present in the market. It is done with the
help of merchant bankers.The merchant bankers can be banks,financial institutions,private
investment firms, etc.In primary market, the preliminary investigation involves a detailed
study of economic, financial, legal, technical aspects to ensure the soundness of the project.
The second function is performed by sponsoring institutions. They provide advisory service.
 Advisory service includes:
 Types of issue,
 Pricing,
 Methods of issue, etc.
 Underwriting- In primary market, to ensure success of new issue, there is a need for
underwriting firms. The company needs to appoint underwriters. They can be banks or
financial institutions or specialized underwriting firms.In primary market, underwriting can be
done by a single underwriter or by a group of underwriters. Minimum subscription is
guaranteed by underwriters. If the issue is completely subscribed, no liability would be left for
the underwriters. If by chance any part of the issue remains unsold, afterwards the underwriter
has no option, rather than buying all the unsubscribed shares.
 Distribution- In primary market, the success of any grand new issue is hinges on the issue is
being subscribed by the people. The sale of the securities to the supreme or highest investors is
termed as distribution.Distribution Job is given to brokers and dealers. The brokers or agents
maintain direct contact with the supreme investors.

11. Primary market intermediaries
 Merchant bankers Merchant bankers play an important role in issue
management process. Lead managers (category I merchant bankers) have to
ensure correctness of the information furnished in the offer document. They have
to ensure compliance with SEBI rules and regulations as also Guidelines for
Disclosures and Investor Protection. To this effect, they are required to submit to
SEBI a due diligence certificate confirming that the disclosures made in the draft
prospectus or letter of offer are true, fair and adequate to enable the prospective
investors to make a well informed investment decision. The role of merchant
bankers in performing their due diligence functions has become even more
important with the strengthening of disclosure requirements and with SEBI
giving up the vetting of prospectuses. SEBI's various operational guidelines
issued during the year to merchant bankers primarily addressed the need to
enhance the standard of disclosures.
 Underwriters Underwriters are required to register with SEBI in terms of the
SEBI (Underwriters) Rules and Regulations, 1993. In addition to underwriters
registered with SEBI in terms of these regulations, all registered merchant
bankers in categories I, II and III and stockbrokers and mutual funds registered
with SEBI can function as underwriters. Part III gives further details of
registration of underwriters. In 1996-97, the SEBI (Underwriters) Regulations,
1993 were amended mainly pertaining to some procedural matters.

12.  Bankers to an Issue Scheduled banks acting as bankers to an issue are
required to be registered with SEBI in terms of the SEBI (Bankers to the Issue)
Rules and Regulations, 1994. These regulations lay down eligibility criteria for
bankers to an issue and require registrants to meet periodic reporting
requirements. Part III gives further details of registration of bankers to an issue.
 Portfolio managers Portfolio managers are required to register with SEBI in
terms of the SEBI (Portfolio Managers) Rules and Regulations, 1993. The
registered portfolio managers exclusively carry on portfolio management
activities. In addition all merchant bankers in categories I and II can act as
portfolio managers with prior permission from SEBI. Part III gives further details
of the registration of portfolio managers.
 Debenture trustees Debenture trustees are registered with SEBI in terms of
the SEBI (Debenture Trustees) Rules and Regulations, 1993. Since 1995-96, SEBI
has been monitoring the working of debenture trustees by calling for details
regarding compliance by issuers of the terms of the debenture trust deed,
creation of security, payment of interest, redemption of debentures and redressal
of complaints of debenture holders regarding non-receipt of interest/redemption
proceeds on due dates. Part III gives further details of the registration of
debenture trustees.
 Registrars to an Issue and Share Transfer Agents Registrars to an issue
(RTI) and share transfer agents (STA) are registered with SEBI in terms of the
SEBI (Registrar to the Issue and Share Transfer Agent) Rules and Regulations,
1993. Under these regulations, registration commenced in 1993-94 and is
granted under two categories: category I - to act as both registrar to the issue and
share transfer agent and category II - to act as either registrar to an issue or share
transfer agent. With the setting up of the depository and the expansion of the
network of depositories, the traditional work of registrars is likely to undergo a
change.

13. The Secondary Market
 A market, which deals in securities that have been already issued by
companies , is known as “the secondary market”. It is also called the stock
exchange or the share market. The secondary market is that market in
which the buying and selling of the previously issued securities is done. The
transactions of the secondary market are generally done through the
medium of stock exchange.
 The chief purpose of the secondary market is to create liquidity in
securities.
What are the products dealt in Secondary Markets ?
 Equity shares.
 Debentures.
 Government securities.
 Bonds.
 Commercial Papers.
 SEBI Risk Management System

15. Difference between primary market and
secondary market

16. Primary market Secondary market
In primary markets, securities are bought by way of
public issue directly from the company.
In Secondary market share are traded between two
investors.
New issue are available in primary market. Securities usually bought and sold through the
secondary market.
The primary is a middlemen. The secondary market are broker and dealer.
New issue of common stock;bonds and preferred
stock are sold by companies.
The secondary market stock and bonds issues are
sold to the public.

17. REFORMS IN THE SECONDARY MARKET
 Guidelines with reference to substantial takeovers and acquisitions - disclosures
 Guidelines with regards to mandatory public offer to the investors
 Several mutual funds were allowed
 UTI brought under the sebi
 Advertising code was initiated as well as the requirements of pre-vetting of advertisement removed
 To improve the role of the Mutual fund as well as to develop the market of mutual fund in India, mutual funds
were given - right to underwrite the public issues and to make investments in the money market
 Jumbo transfer was introduced for the institutions
 Carry forward system of transactions are permitted to SEs after getting the consent and surveillance
 Carry forward transactions are limited in the case of lenders of the transactions
 Carry forward transactions should be disclosed on the basis of scrip and broker at the beginning of carry
forward session
 Capital adequacy norms were introduced
 Depositories were introduced during the year 1995 Sept.; to record the ownership in the book form
 The introduction of depository requires the changes in the following enactments
Companies Act
Stamp Duty Act
Income Tax Act

18. Secondary Market Intermediaries
 Stock brokers All stock brokers dealing in securities are
registered with SEBI in terms of SEBI (Stock Brokers and Sub
Brokers) Regulation 1992. During 1996-97, 391 additional
brokers were registered with SEBI making the total registered
membership to 8,867 as on March 31, 1997.
 Sub brokers In many cases, individual investors transact in
securities through sub brokers. It is therefore absolutely
imperative to regulate this class of intermediary. As on March
31, 1997 only 1,798 sub brokers were registered with SEBI.
The main reason for the limited success in registering large
number of sub brokers is that brokers are reluctant to take
responsibility of the acts of the sub-brokers. Measures
initiated by SEBI for bringing sub-brokers more fully under
the ambit of regulatory oversight have been described earlier
in this Report.

21. SECONDARY MARKET SCENARIO
Capital Market Reforms: 1996-97
 Depositories Act 1996 - promulgated in order to reduce the problems
associated with the handling of securities
 Guidelines for the custodian of securities were clearly drafted
 Custodian of securities- compliance officer should be appointed - to
bridge the gap in between
 Changes are expected to discuss during the monthly meetings of
Association of Custodian of security services
 Bad delivery cell was set up and code was specified
 System of clearing house or clearance corporation to be set up in the
stock exchange
 Separate committee has been set up for surveillance - inter stock
exchange transactions
 Mumbai and other stock exchanges were allowed to install terminals -
where no exchange exists - to have on line trading
 Norms of the OTCEI were eased to promote more transactions
Capital Market Reforms: 1997-98
 Daily carry forward margin reduced to 10% from 15%
 Over all carry forward increased to Rs.20 crs per broker

22. Capital Market Reforms: 1998-2001
 Buy back of securities were permitted
 Circuit breaker system was introduced to control volatility
 Dematerialized trading was installised
 Rolling settlement introduced
 Internet trading was introduced
 Guidelines were issued in the angle of maintaining the
transparency
 Clause 49 - to maintain corporate governance introduced
 Stock watch system was introduced
 Steps introduced to reduce the transaction costs
 Trading of stock index and futures - BSE and NSE commenced
 For trading of debt securities - to promote debt market - steps
taken
Capital Market Reforms: 2005-2007
 Golden pegged return funds permitted
 IPO norms are tightened
 Grading of IPOs are suggested

23. TRADING, CLEARING AND
SETTLEMENT:
 Activities in the Secondary Market
 1. Trading of securities
 2. Risk management
 3. Clearing and settlement of trades
 4. Delivery of securities and funds

24. Trading
 Process of Trading
Step 1. Investor / trader decides to trade
Step 2. Places order with a broker to buy / sell the required
quantity of respective securities
Step 3. Best priced order matches based on price-time priority
Step 4. Order execution is electronically communicated to the
broker’s terminal
Step 5. Trade confirmation slip issued to the investor / trader
by the broker
Step 6. Within 24 hours of trade execution, contract note is
issued to the investor / trader by the broker
Step 7. Pay-in of funds and securities before T+2 day
Step 8. Pay-out of funds and securities on T+2 day

25. Settlement
 SEBI has since introduced T+2 rolling settlements from April 1, 2003. T+2 settlement cycle means that the
final settlement of transactions done on T, i.e., trade day by exchange of monies and securities between the
buyers and sellers respectively occurs on second business day after the trade day excluding Saturdays,
Sundays, bank holidays and exchange holidays.
DAY ACTIVITY
 T Trading and daily downloading of statements showing details of
transactions and margins at the end of each trading day.
6A/7A* entry by the member-brokers/ confirmation by the
custodians.
 T+1 Confirmation of 6A/7A data by the custodians up to a specified
deadline time. Downloading of securities and funds obligation
statements by members.
 T+2 Pay-in of funds and securities and pay-out of funds and
securities by pre specified deadline times. The members are
required to submit the pay-in instructions for funds and
securities
to banks and depositories respectively.
 T+3 Auction for shortages in delivery of securities.
 T+4 Auction pay-in and pay-out of funds and securities.

26. 6A/7A: A mechanism whereby the obligation of settling the transactions done by a
member-broker on behalf of a client is passed on to a custodian based on his
confirmation. The custodian can confirm the trades done by the members on-line.
Trading on the on-line screen based system (BSE’s On-Line Trading system, BOLT for
BSE and National Exchange for Automated Trading, NEAT for NSE) is conducted from
Monday to Friday between 9:55 a.m. and 3:30 p.m. The scrips traded on The Stock
Exchange, Mumbai are classified into ‘A’, ‘B1’, ‘B2’, 'C', ‘F’, 'G' and 'Z'
groups.
A, B1, B2 and C groups represent the equity market segment. ‘F’ group represents the
debt market (fixed income securities) segment. BSE has commenced trading in Govt.
Securities for retail investors under “G” group w.e.f. January 16, 2003. 'Z’ group covers
the companies, which have failed to comply with listing requirements and/or failed to
resolve investor complaints or have not made the required arrangements for
dematerialization of their securities with both the depositories.
Problems with physical mode of settlement
• Fake shares
• Stolen shares
• Fake signatures or signature mismatches
• Mutilation of shares
• Other problems in transfer of ownership

27.  Clearing: the process of transmitting, reconciling and,
in some cases, confirming payment orders or security
transfer instructions prior to settlement, possibly
including the netting of instructions and the
establishment of final positions for settlement.
 Settlement: the completion of a transaction, wherein
the seller transfers securities or financial instruments
to the buyer and the buyer transfers money to the
seller.
 Central Securities Depository (CSD) : a facility
(or an institution) for holding securities, which enables
securities transactions to be processed by book entry.
Physical securities may be immobilized by the
depository or securities may be dematerialized (ie so
that they exist only as electronic records). In addition
to safekeeping, a central securities depository may
incorporate comparison, clearing and settlement
functions.

28. Listing of Securities
 Listing means the admission of securities of a
company to trading on a stock exchange. Listing is
not compulsory under the Companies Act. It
becomes necessary when a public limited company
desires to issue shares or debentures to the public.
When securities are listed in a stock exchange, the
company has to comply with the requirements of the
exchange.

29. Objectives of Listing
 1. To provide ready marketability and liquidity of a
company’s securities.
 2. To provide free negotiability to stocks.
 3. To protect shareholders and investors interests.
 4. To provide a mechanism for effective control and
supervision of trading.

30. Listing requirements
A company which desires to list its shares in a stock exchange has to
comply with the following requirements:
1. Permission for listing should have been provided for in
the Memorandum of Associationand Articles of Association.
2. The company should have issued for public subscription at least the
minimum prescribed percentage of its share capital (49 percent).
3. The prospectus should contain necessary information with regard to
the opening of subscription list, receipt of share application etc.
4. Allotment of shares should be done in a fair and reasonable
manner. In case of over subscription, the basis of allotment should
be decided by the company in consultation with the recognized
stock exchange where the shares are proposed to be listed.
5. The company must enter into a listing agreement with the stock
exchange. The listing agreement contains the terms and conditions
of listing. It also contains the disclosures that have to be made by
the company on a continuous basis.

31. Listing Procedure
The following are the steps to be followed in listing of a company’s
securities in a stock exchange:
1. The promoters should first decide on the stock exchange or exchanges
where they want the shares to be listed.
2. They should contact the authorities to the respective stock exchange/
exchanges where they propose to list.
3. They should discuss with the stock exchange authorities the
requirements and eligibility for listing.
4. The proposed Memorandum of Association, Articles of Association and
Prospectus should be submitted for necessary examination to the stock
exchange authorities
5. The company then finalizes the Memorandum, Articles and Prospectus
6. Securities are issued and allotted.
7. The company enters into a listing agreement by paying the prescribed
fees and submitting the necessary documents and particulars.
8. Shares are then and are available for trading.

32. STOCK MARKET INDEX
 STOCK EXCHANGE
A stock exchange can be defined as a centralized market for
buying and selling stocks where the price is determined
through supply-demand mechanism.
According to the Securities
Contracts(Regulation)Act ,1956,which is the
main law governing stock exchanges in India,
“stock exchange means any body of individuals,
whether incorporated or not, constituted for the
purpose of assisting, regulating, or controlling
the business of buying, selling or dealing in
securities.

33. A stock market index is a method of measuring a section of the stock
market. Many indices are cited by news or financial services firms
and are used as benchmarks, to measure the performance
of portfolios such as mutual funds.
Alternatively, an index may also be considered as an instrument (after
all it can be traded) which derives its value from other instruments or
indices. The index may be weighted to reflect the market
capitalization of its components, or may be a simple index which
merely represents the net change in the prices of the underlying
instruments. Most publicly quoted stock market indices are weighted.
In the Stock Market, companies sell shares to the public. That means
that the companies are actually selling power of the company to the
public.
Stock market indices are the barometer of the stock market.
BSE SENSEX,NSE-50 etc are some of the market indices.
Their Usefulness:
 Indices help to recognize broad trends in the market.
 The investor can use the indices to allocate the funds rationally
among the stocks.
 Technical analysts use these indices to predict the future market.
 Indices function as a status report on the general economy.

34. CRITERIA FOR SELECTING STOCKS TO
CALCULATE INDEX
 Listing history: The company should have listing
history on BSE for at least one year
 Track record: The company should have listing history
 Market capitalization: Company should have one
among 100 market capitalizations of BSE,And each
company should have more than0.5% of total market
capitalization of BSE INDEX
 Frequency of trading: Company stocks should be
traded on each and every trading day for the last one year
 Industrial representation: Company Should be a
leader in the industry it represents

35. STOCK INDEX CALCULATION

39. STOCK INDICES IN INDIA
 Bombay Stock Exchange(BSE) – Sensex
 National Stock Exchange of India(NSE) – Nifty
 MCX Stock Exchange [MCX - SX]
BOMBAY STOCK EXCHANGE (BSE)
 Bombay Stock Exchange is the oldest stock exchange in Asia.
 BSE is the first stock exchange in the country.
 Over the past 133 years, BSE has facilitated the growth of the Indian
corporate sector by providing it with cost and time efficient access to
resources.
NATIONAL STOCK EXCHANGE (NSE)
 The National Stock Exchange of India (NSE) situated in Mumbai.
 The NSE is owned by the group of leading financial institutions such as
Indian Bank or Life Insurance Corporation of India.
MCX Stock Exchange
 It commenced operations in the Currency Derivatives (CD) segment on
October 7.
 The Exchange is recognized by SEBI under Section 4 of Securities Contracts
(Regulation) Act, 1956.
 At the end of June 2012, MCX-SX had 750 members and saw participation
from 707 towns and cities across India.

40. Measurement to boost liquidity in
Secondary Market
A number of measures were taken by SEBI to increase
liquidity in the stock market. The stock market was
opened to foreign institutional investors (FII) for
investment. The depository system, stock lending
system, buy back of shares, market making system,
margin trading of shares, and rolling settlement were
introduced to increase liquidity in the stock market.

41.  Investment by Foreign Institutional Investors
in the Indian Stock Market:
 FIIs commenced their operations in the Indian stock
markets with a token investment of Rs 0.6 crore in
January 1993. They have become active investors since
August 1993.FIIs such as mutual funds, pension funds,
country funds, and so on are operating in the Indian
capital market.
 To facilitate the operations of the FIIs, SEBI granted
permission to foreign brokers to extend assistance to
all registered FIIs. The government now allows foreign
financial service institutions to set up joint ventures in
stock broking asset management, merchant banking
and other financial services along with Indian partners.
Foreign participation in financial services requires the
approval of the Foreign Investment Promotion Board
(FIPB). Moreover, SEBI allowed domestic companies
to privately place their issues with FIIs, subject to
certain formalities.

42. SECURITIES AND EXCHANGE BOARD OF INDIA
(FOREIGN INSTITUTIONAL INVESTORS)
REGULATIONS, 1995
Why do we need a regulatory body for Investor protection in
India?
 India is an ` informationally ' weak market
 Boosting capital market demands restoring the confidence of lay investors
who have been beaten down by repeated scams
 Progressively softening interest rates and an under performing economy
have eroded investment options, and require enhanced investing skills.
Mission of SEBI
 Securities & Exchange Board of India (SEBI) formed under the
SEBI Act, 1992 with the prime objective of
 Protecting the interests of investors in securities,
 Promoting the development of, and
 Regulating, the securities market and for matters connected therewith or
incidental thereto.’
Focus being the greater investor protection, SEBI has become a
vigilant watchdog

43. FUNCTIONS OF SEBI
 Section 11 of the Securities and Exchange Board of India Act.
 Regulation Of Business In The Stock Exchanges
A) review of the market operations, organizational structure and administrative
control of the exchange
 All stock exchanges are required to be Body Corporates
 The exchange provides a fair, equitable and growing market to investors.
 The exchange’s organisation, systems and practices are in accordance with the Securities
Contracts (Regulation) Act (SC(R) Act), 1956
B) Registration And Regulation Of The Working Of Intermediaries
Portfolio Managers
Sub- BrokersUnderwriters
Stock brokersMerchant Bankers
Secondary MarketPrimary Market

44. C) Registration And Regulation Of Mutual Funds, Venture Capital
Funds & Collective Investment Schemes
 AMFI-Self Regulatory Organization-'promoting and protecting the interest of mutual funds and
their unit-holders, increasing public awareness of mutual funds, and serving the investors'
interest by defining and maintaining high ethical and professional standards in the mutual
funds industry'.
 Every mutual fund must be registered with SEBI and registration is granted only where SEBI is
satisfied with the background of the fund.
 SEBI has the authority to inspect the books of accounts, records and documents of a mutual
fund, its trustees, AMC and custodian where it deems it necessary
 SEBI (Mutual Funds) Regulations, 1996 lays down the provisions for the
appointment of the trustees and their obligations
 Every new scheme launched by a mutual fund needs to be filed with SEBI and
SEBI reviews the document in regard to the disclosures contained in such
documents.
 Regulations have been laid down regarding listing of funds, refund procedures,
transfer procedures, disclosures, guaranteeing returns etc
 SEBI has also laid down advertisement code to be followed by a mutual fund in
making any publicity regarding a scheme and its performance
 SEBI has prescribed norms / restrictions for investment management with a view
to minimize / reduce undue investment risks.
 SEBI also has the authority to initiate penal actions against an erring MF.
 In case of a change in the controlling interest of an asset management company,
investors should be given at least 30 days time to exercise their exit option

45. D) Promoting & Regulating Self Regulatory Organizations
 In order for the SRO to effectively execute its responsibilities, it would be required to be
structured, organized, managed and controlled such that it retains its independence, while
continuing to perform a genuine market development role
E) Prohibiting Fraudulent And Unfair Trade Practices In The Securities
Market
 SEBI is vested with powers to take action against these practices relating to securities market
manipulation and misleading statements to induce sale/purchase of securities.
F] Prohibition Of Insider Trading
 Stock Watch System, which has been put in place, surveillance over insider
trading would be further strengthened.
G] Investor Education And The Training Of Intermediaries
 SEBI distributed the booklet titled “A Quick Reference Guide for Investors” to the investors
 SEBI also issued a series of advertisement /public notices in national as well as regional
newspapers to educate and caution the investors about the risks associated with the
investments in collective investment schemes
 SEBI has also issued messages in the interest of investors on National Channel and Regional
Stations on Doordarshan.
H) Inspection And Inquiries
I) Regulating Substantial Acquisition Of Shares And Take-overs
J) Performing Such Functions And Exercising Such Powers Under
The Provisions Of The Securities Contracts (Regulation) Act, 1956 As
May Be Delegated To It By The Central Government;
K) Levying Fees Or Other Charges For Carrying Out The Purposes
Of This Section
L) Conducting Research For The Above Purposes