SEBI Act, 1992
Introduction
- SEBI (Security Exchange Board of India ) is the regulator for the securities market in India. It was established on 12 April 1992 through the SEBI Act, 1992 by Central Government in Amended in 1992, 1995, 2002 and 2005.
- It was officially established by The Government of India in the year 1988 and given statutory powers in 1992 with SEBI Act 1992 being passed by the Indian Parliament.
- The SEBI is managed by its members, which consists of following: a) The chairman who is nominated by Union Government of India. b) Two members, i.e. Officers from Union Finance Ministry. c) One member from The Reserve Bank of India. d) The remaining 5 members are nominated by Union Government of India, out of them at least 3 shall be whole-time members.
Objectives of SEBI
- To protect and safeguard the interest of the investors in Securities market
- To develop, promote and regulate the securities market
- To provide education to the investors
- To regulate of the working of the capital market
- To regulate the working of the organizations dealing in securities
- To regulate the fees of the brokers and underwriters
- To fix minimum application amount
- To fix the minimum raising of the capital
- Prohibiting of insider trading
- Prohibition of unfair trade and fraudulent practices
- To regulate the investment plan or schemes
- Regulation of the shares of the company
Functions of SEBI
- To levy fines
- To adhere norms and rules laid down by Central Government
- Conducting research
- Educating investors
- Registering and regulating the working of the mutual funds, investors delaing with capital markets
- Audit of stock exchanges
- Under taking inspections
- Calling for information of the books of records
Powers of SEBI
It has below jurisdiction of a civil court:
- Summoning the witness and enforcing the attendance of the person
- Examining the witness on oath
- Inspection of any books, records, and documents of a person
- Inspection of any books, records, and documents of a company
- Forming commission for the investigation
- Power to investigate
- Power to adjudicate
- Power to issue directions
- Power to suspend trading of any securities
- Power to suspend brokers
- Power to suspend any office bearer of any stock exchange
- Power to impoud and retain the proceeds or securities in respect of any transaction which is under investigation upto 6 months
- Power to attach not to exceed 1 month
- Can file any complaint without the prior submission of the court
- Monetary fines
Securities Appellate Tribunal (SAT)
- Composition: 3 member chamber, headed by a presiding officer and appointed by Central Government
- Qualification: Presiding officer – should be a sitting or retired high court judge or supreme court judge; Other 2 members should have sufficient knowledge in Law, finance, economy, accountancy and securities of the market.
ESTABLISHMENT, JURISDICTION, AUTHORITY AND PROCEDURE OF APPELLATE TRIBUNAL
15K.Establishment of Securities Appellate Tribunals.- (1) The Central Government shall, by notification, establish one or more Appellate Tribunals to be known as the Securities Appellate Tribunal to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act [56][or any other law for the time being in force ]
(2) The Central Government shall also specify in the notification referred to in sub-section (1) the matters and places in relation to which the Securities Appellate Tribunal may exercise jurisdiction.
[57][15L.Composition of Securities Appellate Tribunal. A Securities Appellate Tribunal shall consist of a Presiding Officer and two other Members, to be appointed, by notification, by the Central Government:
Provided that the Securities Appellate Tribunal, consisting of one person only, established before the commencement of the Securities and Exchange Board of India (Amendment) Act, 2002, shall continue to exercise the jurisdiction, powers and authority conferred on it by or under this Act or any other law for the time being in force till two other Members are appointed under this section.
15M.Qualification for appointment as Presiding Officer or Member of the Securities Appellate Tribunal. (1) A person shall not be qualified for appointment as the Presiding Officer of a Securities Appellate Tribunal unless he is a sitting or retired Judge of the Supreme Court or a sitting or retired Chief Justice of a High Court:
Provided that the Presiding Officer of the Securities Appellate Tribunal shall be appointed by the Central Government in consultation with the Chief Justice of India or his nominee.
(2) A person shall not be qualified for appointment as Member of a Securities Appellate Tribunal unless he is a person of ability, integrity and standing who has shown capacity in dealing with problems relating to securities market and has qualification and experience of corporate law, securities laws, finance, economics or accountancy:
Provided that a member of the Board or any person holding a post oat senior management level equivalent to Executive Director in the Board shall not be appointed as Presiding Officer or Member of a Securities Appellate Tribunal during his service or tenure as such with the Board or within two years from the date on which he ceases to hold office as such in the Board.]
[58][15N. Tenure of office of Presiding Officer and other Members of Securities Appellate Tribunal. The Presiding Officer and every other Member of a Securities Appellate Tribunal shall hold office for a terms of five years from the date on which he enters upon his office and shall be eligible for re-appointment:
Provided that no person shall hold office as the Presiding Officer of the Securities Appellate Tribunal after he has attained the age of sixty-eight years:
Provided further that no person shall hold office as Member of the Securities Appellate Tribunal after he has attained the age of sixty-two years.]
15O.Salary and allowances and other terms and conditions of service of Presiding Officers.- The salary and allowances payable to and the other terms and conditions of service (including pension, gratuity and other retirement benefits) of the [59][Presiding Officer and any other Member of a Securities Appellate Tribunal] shall be such as may be prescribed:
Provided that neither the salary and allowances nor the other terms and conditions of service of the [60][Presiding Officer and other Members of a Securities Appellate Tribunal] shall be varied to their disadvantage after appointment.
15P.Filling up of vacancies. – If, for reason other than temporary absence; any vacancy occurs in [61][the office of the Presiding Officer or any other Member] of a Securities Appellate Tribunal, then the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and, the proceedings may be continued before the Securities Appellate Tribunal from the stage at which the vacancy is filled.
15Q.Resignation and removal. – (1) [62][The Presiding Officer or any other Member of a Securities Appellate Tribunal] may, by notice in writing under his hand addressed to the Central Government, resign his office:
Provided that [63][the Presiding Officer or any other Member] shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office, until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.
(2) The [64][Presiding Officer or any other Member] of a Securities Appellate Tribunal shall not be removed from his office except by an order by the Central Government on the ground of proved misbehaviour or incapacity after inquiry made by a Judge of the Supreme Court, in which the [65][Presiding Officer or any other Member] concerned has been informed of the charges against him and given a reasonable opportunity of being heard in respect of these charges.
(3) The Central Government may, by rules, regulate the procedure for the investigation of misbehavior or incapacity of the [66][the Presiding Officer or any other Member].
15R.Orders constituting Appellate Tribunal to be final and not to invalidate its proceedings. -No order of the Central Government appointing any person as the [67][Presiding Officer or a Member] of a Securities Appellate Tribunal shall be called in question in any manner, and no act or proceeding before a Securities Appellate Tribunal shall be called in question in any manner on the ground merely of any defect in the constitution of a Securities Appellate Tribunal.
15S.Staff of the Securities Appellate Tribunal. – (1) The Central Government shall provide the Securities Appellate Tribunal with such officers and employees as that Government may think fit.
(2) The officers and employees of the Securities Appellate Tribunal shall discharge their functions under general superintendence of the Presiding Officer.
(3) The salaries and allowances and other conditions of service of the officers and employees of the Securities Appellate Tribunal shall be such as may be prescribed.
15T.Appeal to the Securities Appellate Tribunal. – [68][(1) Save as provided in sub-section (2), any person aggrieved,-
(a) by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder; or
(b) by an order made by an adjudicating officer under this Act,
may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter.
(2) No appeal shall lie to the Securities Appellate Tribunal from an order made__
(a) by the Board on and after the commencement of the Securities Laws (Second Amendment) Act, 1999;
(b) by an adjudicating officer,
with the consent of the parties.]
(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which [69][a copy of the order made by the Board or the adjudicating officer, as the case may be,]is received by him and it shall be in such form and be accompanied by such fee as may be prescribed:
Provided that the Securities Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period.
(4) On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.
(5) The Securities Appellate Tribunal shall send a copy of every order made by it to the [70][Board, the parties] to the appeal and to the concerned Adjudicating Officer.
(6) The appeal filed before the Securities Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal.
15U.Procedure and powers of the Securities Appellate Tribunal. – (1) The Securities Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908(5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Securities Appellate Tribunal shall have powers to regulate their own procedure including the places at which they shall have their sittings.
(2) The Securities Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908(5 of 1908), while trying a suit, in respect of the following matters, namely:
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses or documents;
(e) reviewing its decisions;
(f) dismissing an application for default or deciding it ex parte;
(g) setting aside any order of dismissal of any application for default or any order passed by it ex parte;
(h) any other matter which may be prescribed.
(3) Every proceeding before the Securities Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code(45 of 1860), and the Securities Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973(2 of 1974).
[71][15V.Right to legal representation. – The appellant may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers to present his or its case before the Securities Appellate Tribunal.
Explanation:- For the purposes of this section,–
(a) “chartered accountant” means a chartered accountant as defined in clause(b) of sub-section(1) of section 2 of the Chartered Accountants Act, 1949(38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(b) “company secretary” means a company secretary as defined in clause(c) of sub-section(1) of section 2 of the Company Secretaries Act,1980(56 of 1980) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(c) ” cost accountant” means a cost accountant as defined in clause(b) of sub-section(1) of section 2 of the Cost and Works Accountants Act, 1959(23 of 1959) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(d) “legal practitioner” means an advocate, vakil or any attorney of any High Court, and includes a pleader in practice.]
15W.Limitation. -The provisions of the Limitation Act, 1963 (36 of 1963), shall, as far as may be, apply to an appeal made to a Securities Appellate Tribunal.
Penalties under SEBI
- Failure to furnish information
- Failure to enter into agreements with clients
- Failure to redress the grievance of the investors
- Default in the case of mutual funds
- Failure to absorb the rules and regulations by an asset management company
- Penalty for default in the case of Stock brokers
Penalty: 1 lakh per day or Upto 1 crore whichever is less for above six.
- Penalty for insider trading
- Penalty for non-disclosure of acquisition or take over
- Penalty for fraudulent and unfair trade practices
Penalty: Upto 25 crores or 3 times of the profits of those transactions, whichever is higher.
- Penalty for contravention (meaning: coming into conflict with)
Penalty: Upto 1 crore
Securities Contracts (Regulation) Act, 1956 and Rules
