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SEBI ,[object Object]
Malpractices in securities market ,[object Object],[object Object]
Price rigging
Insider trading
Delay in settlements & listiing,[object Object]
SEBI ,[object Object],Set up on April 12, 1988 as a non statutory body,[object Object],In 1992 – through  SEBI Act –powers to control capital markets were conferred,[object Object]
Objectives of SEBI,[object Object],Primary objectives : to promote healthy & orderly growth of securities market & protect investors,[object Object],To maintain steady flow of savings into capital markets,[object Object],To regulate securities market & ensure fair practice by issuers to help them raise resources at minimum cost,[object Object],To promote efficient services by brokers, merchant bankers and other intermediaries to make them professional  and competitive,[object Object]
Functions of SEBI ,[object Object],Regulatory function:,[object Object],Regulation of stock exchanges & other organisations,[object Object],Registration  & regulation of stock brokers, sub brokers, merchant bankers, underwriters and other intermediaries,[object Object],Registration & regulation of working of collective investment schemes like mutual funds,[object Object],Prohibition of unfair trade practices , insider trading, substantial acquisition of of shares by companuies,[object Object]
Functions of SEBI,[object Object],Development function :,[object Object],Promote investors education,[object Object],Training of intermediaries,[object Object],Conduct research & provide information to market participants,[object Object],Promoting self regulatory organisations,[object Object]
Organisation ,[object Object],Chapter II of SEBI Act deals with incorporation, administration & management ,….,[object Object],The Statutory Board consists of six members,[object Object],The chairman & 2 members are to be appointed by the central govt,[object Object],One member by RBI,[object Object],Another two with experience of securities market  - to be appointed by central govt,[object Object]
Organisation  - 4 operational departments,[object Object],Primary market department : all policy matters & regulatory issues relating to primary market, market intermediaries, investors grievances, matters relating to Self Regulatory Organisations (SROs),[object Object],Issue Management & Intermediaries Department : registration, regulation & monitoring issue related information,[object Object]
Operational departments – contd ,[object Object],Secondary Market Department : policy & regulatory issues, administration of major stock exchanges,…,[object Object],Institutional Investment Department: framing policy of foreign Institutional investors, mutual funds, membership in international organisations,….,[object Object]
Powers of SEBI,[object Object],To call periodical returns from recognised stock exchanges,[object Object],To ask explanation from recognised stock exchanges / their members,[object Object],To direct enquiries on any stock exchange,[object Object],To make / amend by laws of recognised stock exchanges,[object Object],To compel listing of securities by public companies,[object Object],To control * regulate stock exchanges,[object Object]
Powers  - contd,[object Object],To levy fees or charges for carrying out the purpose of regulations,[object Object],To declare applicability of Sec 17 of Securities contract (Regulation) Act to grant licenses to dealers of securities.,[object Object]
SEBI & central Govt,[object Object],Central govt can supersede SEBI board,[object Object],It has the powers to direct SEBI & to call for reports and returns from SEBI,[object Object],SEBI General Fund : used to meet the expenses of SEBI board, pay salaries,… consists of :,[object Object],Grants given by the Central govt,[object Object],Fees & charges collected from stock exchanges,[object Object]
Public Issue,[object Object],Corporates  may raise capital in the primary market by way of an initial public offer, rights issue or private placement.,[object Object],This Initial Public Offering can be made through the fixed price method, book building method or a combination of both. ,[object Object]
Fixed price vs Book building method,[object Object],Offer Price at which the securities are offered and would be allotted is made known in advance to the investors,[object Object],Demand for the securities offered is known only after the closure of the issue,[object Object],A 20 % price band is offered by the issuer within which investors are allowed to bid and the final price is determined  only after closure of the bidding.,[object Object],Demand for the securities offered , and at various prices, is available on a real time basis on the BSE website during the bidding period.,[object Object]
Contd ,[object Object],10 % advance payment is required to be made by the QIBs along with the application, while other categories of investors have to pay 100 % advance,[object Object],50 % of shares offered are reserved for QIBS, 35 % for small investors and the balance for all other investors.,[object Object],100 % advance payment is required to be made by the investors at the time of application.,[object Object],50 % of the shares offered are reserved for applications below Rs. 1 lakh and the balance for higher amount applications.,[object Object]
Book Building ,[object Object],The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors. ,[object Object],An underwriter "builds a book" by accepting orders from fund managers indicating the number of shares they desire and the price they are willing to pay. ,[object Object],Book-building is the most practical mechanism for the quick and efficient management of mega issues (including offers of sale).,[object Object]
Book building,[object Object],Book-building is a mechanism by which the issue price is discovered on the basis of bids received from syndicate members/brokers and not by the issuers/merchant bankers.,[object Object],However, it is felt that this system will be more suited for companies that are in existence for some time as past financial data are available for analysis and there will be awareness of the company, etc. and  for Follow on Public Offers (FPO),[object Object]
In India,[object Object],The introduction of book-building in India in 1995 followed the recommendation of an expert committee appointed by SEBI under Y. H. Malegam,[object Object],The committee recommended and SEBI accepted the book building route in Nov 1995 ,[object Object]
BSE – book building,[object Object],BSE offers a book building platform through the Book Building software that runs on the BSE Private network.,[object Object],This system is one of the largest electronic book building networks in the world, spanning over 350 Indian cities through over 7000 Trader Work Stations via leased lines, VSATs and Campus LANS.,[object Object],The software is operated by book-runners of the issue and by the syndicate members , for electronically placing the bids on line real-time for the entire bidding period.,[object Object],In order to provide transparency, the system provides visual graphs displaying price v/s quantity on the BSE website as well as all BSE terminals.,[object Object]
Process of book building,[object Object],The Issuer who is planning an offer nominates lead merchant banker(s) as 'book runners'.,[object Object],The Issuer specifies the number of securities to be issued and the price band for the bids.,[object Object],The Issuer also appoints syndicate members with whom orders are to be placed by the investors.,[object Object],The syndicate members input the orders into an 'electronic book'. This process is called 'bidding' and is similar to open auction.,[object Object]
Process contd,[object Object],The book normally remains open for a period of 5 days.,[object Object],Bids have to be entered within the specified price band.,[object Object],Bids can be revised by the bidders before the book closes.,[object Object],On the close of the book building period, the book runners evaluate the bids on the basis of the demand at various price levels.,[object Object]
Process contd ,[object Object],The book runners and the Issuer decide the final price at which the securities shall be issued.,[object Object],Generally, the number of shares are fixed, the issue size gets frozen based on the final price per share.,[object Object],Allocation of securities is made to the successful bidders. The rest get refund orders.,[object Object]
red herring prospectus ,[object Object], A prospectus that does not have complete particulars on the price of securities offered and the quantum of securities offered. ,[object Object],The Concise Oxford Dictionary gives the meaning of `red herring' as a misleading clue or distraction, so named from the practice of using the scent of red herring (a silvery fish) in training hounds.,[object Object]
Qualified Institutional Buyer (QIB) ,[object Object],Alegal designation assigned to a purchaser of securities who meets a certain minimum level of sophistication, size and market savvy with respect to complicated or risky securities. ,[object Object],Issuers and their banks may elect to market private placement, stock or bond offerings only to QIB clients as a means to save time and transaction costs,[object Object]
"Qualified Institutional Buyers ,[object Object],“are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets”         --- SEBI,[object Object]
Who are QIBs?,[object Object],[object Object]
Scheduled commercial banks;
Mutual funds
Foreign institutional investor registered with    SEBI
Multilateral and bilateral development financial institutions

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