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Unit 13: Regulatory Framework

Notes

Notes Recognised Stock Exchanges are allowed to make bylaws for the regulation and
control of contracts but subject to the previous approval of SEBI and SEBI has the power to
amend the said bylaws.

The Central Government and SEBI have the power to supersede the governing body of any
recognised stock exchange.

13.4.2 Contracts in Securities

Organised trading activity in securities takes place on a recognised stock exchange. If the Central
Government is satisfied, having regard to the nature or the volume of transactions in securities
in any State or area, that it is necessary so to do, it may, by notification in the Official Gazette,
declare provisions of section 13 to apply to such State or area, and thereupon every contract in
such State or area which is entered into after date of the notification otherwise than between
members of a recognised stock exchange in such State or area or through or with such member
shall be illegal. The effect of this provision clearly is that if a transaction in securities has to be
validly entered into, such a transaction has to be either between the members of a recognised
stock exchange or through a member of a Stock Exchange.

13.4.3 Listing of Securities

Where securities are listed on the application of any person in any recognised stock exchange,
such person shall comply with the conditions of the listing agreement with that stock exchange
(Section 21). Where a recognised stock exchange acting in pursuance of any power given to it by
its bye-laws, refuses to list the securities of any company, the company shall be entitled to be
furnished with reasons for such refusal and the company may appeal to Securities Appellate
Tribunal (SAT) against such refusal.

13.4.4 Securities Contracts (Regulation) Rules, 1957

The Central Government has made Securities Contracts (Regulation) Rules, 1957, as required by
sub-section (3) of the Section 30 of the Securities Contracts (Regulation) Act, 1956 for carrying
out the purposes of that Act. The powers under the SC(R)R, 1957 are exercisable by SEBI.
Contracts between members of recognised stock exchange: All contracts between the members of
a recognised stock exchange shall be confirmed in writing and shall be enforced in accordance
with the rules and byelaws of the stock exchange of which they are members (Rule 9).

Books of account and other documents to be maintained and preserved by every member of a
recognised stock exchange:
1. Every member of a recognised stock exchange shall maintain and preserve the following
books of account and documents for a period of five years:
(a) Register of transactions (Sauda book).
(b) Clients’ ledger.

(c) General ledger.
(d) Journals.
(e) Cash book.

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