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Indian Financial System
Notes (o) To make regulations pertaining to the conditions for registration certificate, fee for
registration, cancellation/suspension of registration of intermediaries, issue of
capital, transfer of securities and so on.
Did u know? In the wake of the financial fraud at Satyam Computers detected in January
2009, the SEBI has decided to make it mandatory for promoters of listed companies to
disclose to the exchanges the quantum of shares they have pledged with lenders to raise
money.
14.2.4 Administration of SEBI
The SEBI is administered by a Board of Members consisting of a Chairman and five members -
one each from the Department of Finance and Law of the Central Government, one from the RBI
and two other persons. The SEBI has its head office in Mumbai and regional offices in Delhi,
Kolkata and Chennai. The government reserves the right to terminate the services of the Chairman
or any member of the Board. The Board decides the issues in the meeting by a majority vote with
the Chairman having a second or casting vote.
14.2.5 Operations of SEBI – An Evaluation
If one realizes the sordid fact that the regulation of securities market is challenging, the going
turns out to be always tough. Since its inception, the SEBI has been working toward deepening
and strengthening primary and secondary markets, improving operational efficiency and
liquidity and reducing intermediation cost and investment risks and thereby safeguarding the
interests of investors, especially of the small investors. The SEBI has sought to do the above
through the comprehensive regulatory measures, prescribing registration norms, the eligibility
criteria, the guidelines and code of obligations and code of conduct for different intermediaries.
It has framed bylaws, risk identification and risk management systems for clearing houses of
stock exchanges, surveillance system, etc., which have made dealing in securities both safe and
transparent to the end investors.
A brief outline of important measures taken by the SEBI to improve the functioning of the
primary and secondary markets is set out above:
Measures in the Primary Market
1. Free entry and free price
2. Minimum public offer of 20% of paid up capital to be eligible for listing on stock exchanges
out of which half is reserved for investors applying for ` 10,000 and less.
3. Minimum subscription by promoters and directors at 25% for issues less than ` 100 crores
and 20% for paid up capital of more than ` 1000 crores.
4. For issues above ` 100 crores, booking building requirement has been introduced.
5. FIIs are allowed to operate both in new issue market and stock market but through Indian
brokers.
In December, 2006, FIIs investment up to 49 percent were allowed in infrastructure
companies.
6. The pricing of preferential allotment has to be at market related levels and there is a five
years lock-in period for such allotments.
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