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LEGAL CONTROL OF STOCK EXCHANGE IN INDIA

LEGAL CONTROL OF STOCK EXCHANGE IN INDIA

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LEGAL CONTROL OF STOCK EXCHANGE IN INDIA

  1. 1. Introduction Control and Regulation of Stock Exchanges in India were regulated directly by the Government of India under powers conferred in terms of the Securities Contract (Regulations) Act 1956 up to the late Eighties. In the year 1988, the Government of India constituted the Securities and Exchange Board of India (Popularly referred as 'SEBI') With headoffice at Mumbaithrough anexecutive resolution to act astheindependent regulator of stock exchanges, the primary market, mutual funds etc. Later SEBI was made into a statutory corporate body in the year 1992 with the passing of the Securities and Exchange BoardofIndiaActon30thJanuary1992.
  2. 2. Controlisanimportantfactorforastockexchangetothrive. The Stock Exchange in India are regulated by the securities contracts (regulation) Act of February20,1957.Ithasfollowingfeatures: 1. Functioningofrecognisedstockexchange. 2. Controloverthestockexchangesbycentralgovernment. 3. Regulatorymeasuresintheworkingofstockexchange. 4. Curbsonspeculation. 5. Setting up directorate of stock exchange for administration and control of stock exchange.
  3. 3. Recognisestockexchange:undertheact,everystockexchangemustapplyforrecognition totheCentralGovernment.Recognisestockexchangehastoensure: 1. Thatitwillfollowrulesandbye-lawsofstatute. 2. That it will act in accordance with the condition laid down by the Central GovernmentfailingwhichtheCentralGovernmentmaywithdrawrecognition.
  4. 4. Control by Central Government: under the act, the Central Government has the right to control the stock exchange in the following ways: 1. By requiring stock exchange to furnish periodical returns about their affairs. 2. By requiring stock exchanges to provide any explanation and information. 3. By requiring the submission of the annual report. 4. By exerting its right, the Central Government may make an inquiry into the working of any recognise stock exchange. 5. The Central Government may also order suspension of business and supersede governing board of stock exchange if business is conducted in violation of rules. 6. The Central Government may appoint its own nominees on any stock exchange subject to minimum limit of three. 7. It may also compel companies to themselves listed and also to comply with listing arrangements.
  5. 5. Regulatorymeasures: CentralGovernmentregulatestheworkingofstockexchangeinthe followingmanner: 1. Itframesbye-lawsregardingtimeoftradeandhoursofworkinstockexchange. 2. Regulationofabolitionofspeculativetradelikeoptions,badlaandblanktransfers. 3. Maintenanceofclearinghouses. 4. Framesarbitrationrulestobefollowedduringdisputes. 5. Fixationofbrokeragefeesandlicense.
  6. 6. Curbsonspeculation:the act asmade variouscurbson speculation.These are 1. Making option dealing illegal. Since july2001, ‘call’ and ‘put’ options have started in 31 stocks. 2. Makingoptiondealingsbeforetheact void and 3. Discouragingblanktransfer. Directorate of stock exchanges: A Directorate of stock exchanges was set up in 1959. It administers and implements the bye –laws contained in the securities regulation act. It is both in and advisory position as well as in a position of implementing laws. It controls the activities of the stock exchange and maintains a close watch over operations and other illegal dealings.It also gives license to dealersonunrecognised stockexchanges.It maintains a liaisonbetweenthe Government andstockmarketsin India.
  7. 7. Security Exchange Board of India: the securities and exchange board of India was establishedbyanactofparliamentin1982followingtheresolutionofthecontrollerofthe capitalissues(CCI),whichderivedandexerciseditspowersintermsofcapitalissueact1947. The controller of capital issue regulated the private sector companies in their activities relatingtosecuritiestobeissued intheprimarymarket,timingofnewissues,composition of securities to be issued, interest and dividend rates to be offered on debentures and preferenceshares,issuesrelating topriceissuesandpremium securities.Thecontrollerof issues was considered to be an in effective dormant institution and not responsive to changesinthestockmarketrelevanttothedynamicdevelopingeconomy.
  8. 8. OTCMarket:asanextensiontothestockmarketactivity,anoverthetradingcounterhad been formed. The primary objective of an ‘OTC’ market is to help small or medium companieswithviableprojectsbuthighrisk.Thecapitalbaseofthecompanieswhichwould bebenefitedwouldbe50lakhand3crore.TheOTCmarketwould extendtheirservicesto semi urban and rural areas. They would be decentralised and extend their operations beyondthefrontiersofthestockexchange.

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  • monicaagmishra

    Apr. 22, 2016
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    Mar. 14, 2018

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