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The article gives an outlook on SEBI, its preamble, the functions of the board, the introduction of the carry forward deal and the amendment to SEBI act.

Securities and Exchange Board of India

On April 12, 1992, the Securities and Exchange Board Of India was constituted. It was constituted in accordance with the provisions of the Securities and Exchange Board Of India Act 1992.

“… protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto”.

Functions Of The Board
  • The Board is responsible for the securing the interests of investors in securities and to facilitate the growth of and to monitor the securities market in an appropriate manner.
  • To monitor and control the performance of stock exchange and derivative markets.
  • Listing and monitoring the functioning 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 others associated with securities markets by any means.
  • Monitoring and Controlling the functioning of venture capital funds and mutual funds.
  • Forbid unjust and dishonest trade practices in the security markets and forbid insider trading in the security market.
  • Undertake periodic audits of stock exchanges, mutual funds, individuals and self regulatory organizations associated with the security market.
Carry Forward Deals
Carry Forward Deal is a trade for which settlement occurs at a specified future date and price.

Carry Forward Deals were made acceptable on the recommendations of the Patel Committee report, SEBI submitted on 27 July 1995. Some of the important features of the revised carry forward transactions as outlined by SEBI are:
  • Carry forward deals are permitted only on stock exchanges which have screen based trading system.
  • Transactions which are carried forward cannot exceed 25% of a broker's total transactions on any one day.
  • 90-day limit for carry forward and squaring off allowed only till the 75th day (or the end of the fifth settlement).
  • Daily margins to rise progressively from 20% in the first settlement to 50% in the fifth.
On 26 January1995, the government promulgated an ordinance amending the SEBI Act, 1992, and the Securities Contracts (Regulation) Act, 1956. In accordance with the amendment, delivering judgment will be created within SEBI and any appeal against this adjudicating authority will have to be made to the Securities Appellate Tribunal, which is to be separately constituted. The appeals related to SEBI will be heard only at the High Courts. The main aspects of the amendment to the Securities Contract (Regulation) Act, 1956, are:
  • The ban on the system of options in trading has been lifted.
  • Additional trading floors on the stock exchanges can be established only with prior permission from SEBI.
  • Any company seeking listing on stock exchanges would have to conform to the listing agreements of stock exchanges, and the failure to comply with these, or their violation, is punishable under law.
  • The time limit, by which stock exchanges could amend their bye-laws, has been reduced to two months.

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