Page 71 - DMGT401Business Environment

Business Environment

Notes 4. All the SEs have been asked to established with a clearing house or a clearing corporation.
5. The BSE has been asked to reduce its trading period or settlement cycle from 14 to 7 days
for B group shares.

6. All the recommendations of the Dave Committee for improving the working of the
OTCEI have been accepted.
7. In accordance with the recommendations of G.S. Patel Committee, the BSE has been allowed
to introduce a revised carry forward system (CFS) of trading. Other SEs can introduce
forward trading only with the prior permission of the SEBI.
8. Brokers are required to segregate the client and its own account.

9. The capital adequacy norms of 3% for individual brokers and 6% for corporate brokers
introduced.
10. Both the brokers and the sub brokers have been brought within the regulatory fold for the
first time now; and the concept of the dual registration of stock brokers with the SEBI and
the SEs has been introduced.

11. Panel action can now be taken directly by the SEBI against any member of a stock exchange
for violation of any provision of the SEBI Act.
12. It has been mandatory for stockbrokers to disclose the transaction price and brokerage
separately in the contract notes issued by them to their clients.
13. Compulsory audit of the brokers' books and filling of the audit reports with the SEBI has
now been made mandatory.
14. Insider trading has been prohibited and such trading has been made a criminal offence
punishable in accordance with the provision of SEBI.

2.4.3 Investment Protection Measures

The SEBI has introduced an automated complaints handling system to deal with investor
complaints. To create awareness, SEBI issues fortnightly press releases, disclosing names to the
companies against whom maximum number of complaints have been received. A representative
of SEBI now supervises the allotment of shares process. Besides many other measures, it also
issues advertisements frequently to make investors aware of various issues of the securities
market and of their rights and remedies.

2.4.4 Insider Training

Insider training in securities is prohibited by SEBI under Insider Trading Regulations 1992.
Insider training can be defined as the sale or purchase of securities by persons who possess price
sensitive information about the company, on account of their fiduciary capacity involving
confidence or trust. SEBI Insider Regulations 1992 defines the insider as any person who is or
was connected with company and who is reasonably expected to have access by virtue of such
connection, to unpublished price sensitive information with respect to the securities of the
company, or who has received or has had access to such unpublished price sensitive information.
Broadly, insiders can be of two types: (a) Primary Insider e.g. Directors, stock exchanges, merchant
bankers, registrars, brokers of the company, top executives, auditors, banks, etc. (b) Secondary
insider e.g. dealers, agents, other employees, etc. (c) Others having access to price sensitive
information due to their proximity with the company.

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