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Stock Market Operations

Notes process, the Act envisages transfer of ownership of securities electronically by book entry
without making the securities move from person to person. The Act has made the securities of
all public limited companies freely transferable, restricting the company’s right to use discretion
in effecting the transfer of securities, and the transfer deed and other procedural requirements
under the Companies Act have been dispensed with.
Companies Act, 1956: It deals with issue, allotment and transfer of securities and various aspects
relating to company management. It provides for standard of disclosure in public issues of
capital, particularly in the fields of company management and projects, information about other
listed companies under the same management, and management perception of risk factors. It
also regulates underwriting, the use of premium and discounts on issues, rights and bonus
issues, payment of interest and dividends, supply of annual report and other information.

Prevention of Money Laundering Act, 2002: The primary objective of the Act is to prevent
money-laundering and to provide for confiscation of property derived from or involved in
money-laundering. The term money-laundering is defined as whoever acquires, owns, possess
or transfers any proceeds of crime; or knowingly enters into any transaction which is related to
proceeds of crime either directly or indirectly or conceals or aids in the concealment of the
proceeds or gains of crime within India or outside India commits the offence of money-laundering.
Besides providing punishment for the offence of money-laundering, the Act also provides other
measures for prevention of Money Laundering. The Act also casts an obligation on the
intermediaries, banking companies, etc. to furnish information, of such prescribed transactions
to the Financial Intelligence Unit, India, to appoint a principal officer, to maintain certain records,
etc.

2.3.2 Rules, Regulations and Regulators

The Government has framed rules under the SCRA, SEBI Act and the Depositories Act. SEBI has
framed regulations under the SEBI Act and the Depositories Act for registration and regulation
of all market intermediaries, and for prevention of unfair trade practices, insider trading, etc.
Under these Acts, Government and SEBI issue notifications, guidelines, and circulars which need
to be complied with by market participants. The SROs like stock exchanges have also laid down
their rules and regulations.
The absence of conditions of perfect competition in the securities market makes the role of
regulator extremely important. The regulator ensures that the market participants behave in a
desired manner so that securities market continues to be a major source of finance for corporate
and government and the interest of investors are protected.
The responsibility for regulating the securities market is shared by Department of Economic
Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank of India (RBI) and SEBI.
The orders of SEBI under the securities laws are appellable before a Securities Appellate Tribunal
(SAT).
Most of the powers under the SCRA are exercisable by DEA while a few others by SEBI. The
powers of the DEA under the SCRA are also con-currently exercised by SEBI. The powers in
respect of the contracts for sale and purchase of securities, gold related securities, money market
securities and securities derived from these securities and ready forward contracts in debt
securities are exercised concurrently by RBI. The SEBI Act and the Depositories Act are mostly
administered by SEBI. The rules under the securities laws are framed by government and
regulations by SEBI. All these are administered by SEBI. The powers under the Companies Act
relating to issue and transfer of securities and non-payment of dividend are administered by
SEBI in case of listed public companies and public companies proposing to get their securities
listed. The SROs ensure compliance with their own rules as well as with the rules relevant for
them under the securities laws.

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