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Corporate Legal Framework

Notes Country rules for foreign intuitional investors Investor protection funds

Permission for private mutual funds
Guidelines for asset management fi rms
Rules for lead managers
Rules for bankers to the issue
Forms for issue of stock invests
Guidelines for bonus share issues
Rules for underwriters
Advisory panels for primary, secondary market
Investor education campaign

In one word, SEBI in its short span of existence, has performed excellently as its developmental
and national role is concerned. How far it would be able to carry out its enforcement role is yet
to be seen.

14.5 Self-regulation

In the foregone sections, we have discussed the regulatory framework applicable to primary
and secondary rule in India. The focus of discussion has been on what may be called legislative
regulation of securities.
In addition to legislative regulation, self-regulation is equally important. Indeed, in developed
securities markets like the UK, the self-regulations play and important role. There exists a number
of self-regulatory organizations in which really complement legislative regulation.
The spirit of self-regulation had been prevalent in the Indian securities market as well. If one
looks at the given to recognized stock exchanges in India to make and enforce bye-laws under
the Securities Contracts (ratio) Act, 1956, one tends to conclude that Indian stock exchanges have
been envisaged as self-regulatory conditions. Just to elaborate the point, let us look at Section 9 of
the Securities Contracts (Regulation) Act, which states as follows.
The recognized stock exchange may, subject to the previous approval of the Central Government
(till 1991) Securities and Exchange Board of India (since 1992) make bye-laws for the regulation
and control of contracts.
In particular, without prejudice to the generally of the foregoing power, such bye-laws may
provide for:
(i) The opening and closing of markets and the regulation of the hours of trade.
(ii) The clearing house for the periodical settlement of contracts and difference there under, the
delivery of the orders for securities, the passing on of delivery orders and the regulation
and maintenance of such a clearing.
(iii) The submission to the Central Government (till 1991) and Securities and Exchange Board
of India (since by the cleaning house as soon as may be after each periodical settlement
of all or any of the following … the Central Government (till 1991) and Securities and
Exchange Board of India (since 1992) may from to time, require, namely:
(a) The total number of each category of security carried over from one settlement period
to another.

(b) The total number of each category of security contracts which have been squared up
during the course of settlement period.

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