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Unit 4: Indian Capital Market

4.6 Regulatory Authority Notes

There are four main legislations governing the securities market:
1. The SEBI Act, 1992 establishes SEBI to protect investors and develop and regulate the
securities market.
2. The Companies Act, 1956 sets out the code of conduct for the corporate sector in relation to
issue, allotment, and transfer of securities, and disclosures to be made in public issues.
3. The Securities Contracts (Regulation) Act, 1956 provides for regulation of transactions in
securities through control over stock exchanges.
4. The Depositories Act, 1996 provides for electronic maintenance and transfer of ownership
of demat securities.
In India, the responsibility of regulating the securities market is shared by DCA (the Department
of Company Affairs), DEA (the Department of Economic Affairs), RBI (the Reserve Bank of
India), and SEBI (the Securities and Exchange Board of India).

Did u know? The DCA is now called the ministry of company affairs, which is under the
ministry of finance. The ministry is primarily concerned with the administration of the
Companies Act, 1956, and other allied Acts and rules & regulations framed thereunder
mainly for regulating the functioning of the corporate sector in accordance with the law.
The ministry exercises supervision over the three professional bodies, namely Institute of
Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI),
and the Institute of Cost and Works Accountants of India (ICWAI), which are constituted
under three separate Acts of Parliament for the proper and orderly growth of professions
of chartered accountants, company secretaries, and cost accountants in the country.
SEBI protects the interests of investors in securities and promotes the development of the securities
market. The board helps in regulating the business of stock exchanges and any other securities
market. SEBI is also responsible for registering and regulating the working of stock brokers,
sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an
issue, merchant bankers, underwriters, portfolio managers, investment advisers, and such other
intermediaries who may be associated with securities markets in any manner.

4.7 Instruments in Indian Capital Market

A capital market is a market for securities (debt or equity), where business enterprises and
government can raise long-term funds. It is defined as a market in which money is provided for
periods longer than a year, as the raising of short-term funds takes place on other markets (e.g.,
the money market). The capital market is characterized by a large variety of financial instruments:
equity and preference shares, fully convertible debentures (FCDs), non-convertible debentures
(NCDs) and partly convertible debentures (PCDs) currently dominate the capital market, however
new instruments are being introduced such as debentures bundled with warrants, participating
preference shares, zero-coupon bonds, secured premium notes, etc.

Secured Premium Notes

SPN is a secured debenture redeemable at premium issued along with a detachable warrant,
redeemable after a notice period, say four to seven years. The warrants attached to SPN gives the
holder the right to apply and get allotted equity shares; provided the SPN is fully paid. There is
a lock-in period for SPN during which no interest will be paid for an invested amount. The SPN

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