Page 70 - DMGT401Business Environment

Unit 2: Industrial Policy and Regulatory Structure

can direct them to amend their bye-laws and rules including reconstitution of their governing Notes
boards/councils; and it is empowered to license security dealers operating outside their
jurisdiction.
SEBI has been empowered to demand explanation, to summon the attendance and call for
documents from all categories of market intermediaries in order to enable it to investigate
irregularities, impose penalties, and initiate prosecution. It is also empowered to notify its
regulations and file complaints in courts without the prior approval of the Government of India.

2.4.2 Certain Guidelines and Reforms Introduced by SEBI

Primary Securities Market

1. The issue of capital no longer requires any consent from any authority for making issue
and for pricing it.
2. SEBI raised the standards of disclosure in public issues and enhanced the transparency.
3. The offer document is now made public even at the draft stage.
4. Companies without track record making first issue can price the issue at par only. At the
first issue companies are free to price their securities, provided they have shown net
profits in the immediately preceding three years, subject to their fulfilling the existing
disclosure requirements.
5. Companies with three years' track record or companies without track record, but promoted
by companies with five years of track record are free to price the issues. They can list the
shares on a stock exchange.
6. Not less than 20% of equity (issued) should be offered to public.

7. For issues above 100 crore, book building requirement has been introduced.
8. The pricing of preferential allotment scheme, a minimum of 50% of the net offer to the
public is to be reserved for individual investors applying for securities not exceeding 1000
securities, and the remaining part can be allotted to applications for more than 1,000
securities.

9. Draft prospectus will be vetted by the SEBI to ensure adequacy of disclosure.
10. Bankers to an issue and portfolio managers have to be registered with the SEBI.
11. Existing listed companies are allowed to raise fresh capital by freely pricing their further
issues. However price should be determined in consultation with the lead managers to the
issues. The high and low prices for the last two years should be indicated in the offer
document. The draft proposal will be vetted by SEBI to ensure adequacy of disclosure.
Secondary Market and Various Intermediaries

1. The governing body and various committees of Stock Exchanges (SEs) have been recognised,
restructured and broad based.
2. Inspection of all 22 SEs has been carried out to determine, inter alia, the extent of compliance
with the directives of the SEBI.
3. Corporate membership of SE is now allowed, encouraged, and preferred. The Articles of
Association of SEs have been amended so as to increase their membership.

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