SEBI Act, 1992 Overview

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Under what circumstances can the Board issue an order for an investigation?

When transactions are detrimental to investors or if regulations are violated. (correct)

If there are no prior violations reported.

Only when there is public demand for an investigation.

When there is a suspicion of unethical trading practices.

What is the primary responsibility of individuals and entities associated with the securities market during an investigation?

To report directly to the public about the investigation.

To withhold documents to protect investor interests.

To defend their practices vigorously.

To preserve and produce relevant documents to the Investigating Authority. (correct)

For how long can the Investigating Authority retain the documents for investigation purposes?

Six months. (correct)

Only until the next quarterly report is published.

One year.

Indefinitely until the investigation concludes.

What must happen if copies of the documents are requested during the investigation?

The Investigating Authority must provide certified copies to the requestor. Signup and view all the answers

Which individuals are expected to provide documents during an investigation?

Managers, directors, officers, and employees of the company involved. Signup and view all the answers

What is the role of the Investigating Authority once an order is issued?

To investigate the affairs of intermediaries and report to the Board. Signup and view all the answers

What may happen if the Investigating Authority determines documents are needed again?

They can call for any document that is needed again. Signup and view all the answers

What is the procedural action if a violation of provisions is suspected?

The Board may order an investigation into the specific individuals or intermediaries. Signup and view all the answers

What must the Investigating Authority demonstrate to apply for the seizure of documents?

Reasonable grounds for believing documents may be destroyed Signup and view all the answers

Which body has the authority to grant permission for the seizure of documents as mentioned?

The designated Magistrate or Judge Signup and view all the answers

Which type of company may have its documents exempt from seizure, barring certain conditions?

A listed public company or a public company seeking listings Signup and view all the answers

What role do other officers, such as police officers, play in the document impounding process?

They are required to comply with the requisition made by the authorized officer Signup and view all the answers

What is the main purpose of the powers granted to the Investigating Authority in this context?

To ensure the integrity of documents critical for investigations Signup and view all the answers

What condition must be met for the Investigating Authority to enter a location for searching documents?

Authorization from the designated court Signup and view all the answers

In which of the following scenarios can the Magistrate or Judge authorize the seizure of documents?

If the company is involved in market manipulation or insider trading Signup and view all the answers

What might trigger the Investigating Authority to make a requisition for other officers' services?

The need for additional manpower for document seizure Signup and view all the answers

What is one of the roles of the Board in securities markets as per the SEBI Act?

To register and regulate the working of credit rating agencies Signup and view all the answers

Which activity is prohibited by the measures established under the SEBI Act?

Facilitating insider trading among institutional investors Signup and view all the answers

Which of the following functions does the Board NOT perform?

Approving the listing of new stocks on exchanges Signup and view all the answers

What is the role of the Board in relation to self-regulatory organizations?

To promote and regulate these organizations Signup and view all the answers

Which of the following is an example of an intermediary regulated by the Board?

Sub-brokers involved in stock transactions Signup and view all the answers

Which action is explicitly charged to the Board under the provisions of the Securities Contracts (Regulation) Act, 1956?

Performing functions and exercising powers delegated by the Central Government Signup and view all the answers

What is the purpose of calling for information from banks or corporations?

To assist in investigations or inquiries relevant to securities transactions Signup and view all the answers

What is one way the Board promotes investor education?

By developing and distributing educational materials to intermediaries Signup and view all the answers

What is the minimum penalty for failing to comply with provisions of the SEBI Act, 1992 when no specific penalty is stated?

One lakh rupees Signup and view all the answers

Which type of failure is penalized under Section 15C of the SEBI regulations?

Not redressing investor grievances within specified time Signup and view all the answers

According to the SEBI Act, what is the maximum penalty one could incur for failing to furnish a required document?

One crore rupees Signup and view all the answers

What is clearly defined as a 'computer contaminant' in relation to the SEBI Act?

A malicious software program as defined by the IT Act Signup and view all the answers

Which section of the SEBI regulations addresses penalties for failing to maintain necessary books of accounts?

Section 15A Signup and view all the answers

If a registered person fails to enter into an agreement with a client as mandated, which penalty section applies?

15B Signup and view all the answers

What type of penalty structure is applied under Section 15A for failures related to false information?

Daily accruing penalty Signup and view all the answers

Which of the following does NOT fall under the penalties specified by Section 15D?

Providing incomplete investor grievances Signup and view all the answers

What is the minimum penalty for failing to furnish required documents as per the stated regulations?

One lakh rupees Signup and view all the answers

According to the regulations, what is the maximum penalty for ongoing failures related to furnishing documents?

One crore rupees Signup and view all the answers

What is required to be sent annually to the Central Government under the provisions mentioned?

Certified accounts and audit reports Signup and view all the answers

What can trigger a penalty under Section 15B?

Failure to enter into an agreement with clients Signup and view all the answers

If a person files incorrect information, which option correctly describes the consequences?

Penalty of one lakh rupees for each day of failure Signup and view all the answers

How is the penalty structured for continuous failure to furnish information?

Daily penalty that increases over time Signup and view all the answers

Which authority certifies the accounts of the Board?

Comptroller and Auditor-General of India Signup and view all the answers

What is the potential penalty for failing to file a return according to the regulations?

One lakh rupees per day up to one crore rupees Signup and view all the answers

What aspect of the regulations ensures accountability before the Parliament?

Annual audit reports Signup and view all the answers

How much will a person be fined for failing to maintain books of accounts?

One lakh rupees each day of failure Signup and view all the answers

Study Notes

SEBI Act, 1992

The Securities and Exchange Board of India (SEBI) Act, 1992 outlines SEBI's powers and responsibilities for regulating India's securities market.

SEBI's Powers and Responsibilities

Regulation of Securities Markets: SEBI regulates stock exchanges and other securities markets.
Registration and Regulation of Intermediaries: SEBI registers and regulates stockbrokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers, depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies and other intermediaries as notified by the Board.
Regulation of Venture Capital Funds and Collective Investment Schemes: SEBI registers and regulates venture capital funds and collective investment schemes, specifically including mutual funds.
Promotion and Regulation of Self-Regulatory Organizations (SROs): SEBI promotes and regulates SROs.
Prohibition of Fraudulent and Unfair Trade Practices: SEBI prohibits fraudulent and unfair trade practices in securities markets.
Investor Education and Training: SEBI promotes investor education and training for intermediaries in securities markets.
Prohibition of Insider Trading: SEBI prohibits insider trading in securities.
Substantial Acquisition of Shares and Takeover Regulation: SEBI regulates substantial acquisition of shares and takeovers of companies.
Information Gathering, Inspection, and Audits: SEBI can call for information from and conduct inspections and audits of stock exchanges, mutual funds, other persons associated with securities markets, intermediaries, and self-regulatory organizations.
Information Gathering from Banks and Other Authorities: SEBI can request information from banks and other authorities relevant to investigations and inquiries related to securities transactions.
Information Sharing with Other Authorities: SEBI can share information with other authorities in India or abroad with similar regulatory functions, subject to the provisions of other laws and the prior approval of the Central Government.
Delegated Powers: SEBI performs the functions and exercises the powers delegated to it by the Central Government under the Securities Contracts (Regulation) Act, 1956.

Investigation

Grounds for Investigation: SEBI can initiate an investigation if it has reasonable grounds to believe that:
- Securities transactions are detrimental to investors or the securities market.
- An intermediary or person associated with the securities market has violated the SEBI Act, rules, regulations, or directions.

Investigation Procedures

Investigating Authority: SEBI can appoint an Investigating Authority to investigate the affairs of intermediaries or persons associated with the securities market.
Document Preservation and Production: Intermediaries and persons associated with the securities market must preserve and produce books, registers, other documents, and records to the Investigating Authority or authorized personnel.
Custody of Documents: The Investigating Authority can keep documents in custody for up to six months and return them to the intermediary or person who produced them. The Investigating Authority can request further access to these documents if needed.
Certified Copies: The Investigating Authority must provide certified copies of the books, registers, other documents, and record produced before the Investigating Authority to the person who produced them.
Impounding of Documents: If the Investigating Authority believes that documents might be destroyed, mutilated, altered, falsified, or secreted, it can apply to the Magistrate or Judge of the designated court in Mumbai for an order to seize these documents.
Assistance from Police or Central Government Officials: Authorized officers can request the assistance of police officers or Central Government officials for impounding documents.

Court Orders for Entry, Search, and Seizure

Order of Court: After considering the application and hearing the Investigating Authority (if necessary), the Magistrate or Judge of the Designated Court can issue an order authorizing the Investigating Authority to:
- Enter the place where documents are kept with necessary assistance.
- Search the place in the manner specified in the order.
- Seize books, registers, other documents, and records deemed necessary for the investigation.
Exemption from Seizure The Magistrate or Judge of the Designated Court will not authorize the seizure of documents from listed public companies or public companies (not being intermediaries specified under Section 12) that intend to get their securities listed on any recognized stock exchange unless these companies are engaging in insider trading or market manipulation.

Annual Accounts and Audit Reports

Certified Accounts: The Board's accounts, certified by the Comptroller and Auditor-General of India or their appointee, along with the audit report, are forwarded annually to the Central Government. The Central Government is responsible for laying these accounts before each House of Parliament.

Penalties and Adjudication

Section 15A:
- Failure to furnish documents, returns, or reports to the Board, or providing false, incorrect, or incomplete information, returns, reports, books, or other documents - Penalty: Not less than INR 1 lakh plus INR 1 lakh per day for each day of continued failure, up to a maximum of INR 1 crore.
- Failure to file returns or furnish documents within the specified time, or providing false, incorrect, or incomplete information, returns, reports, books, or other documents - Penalty: Not less than INR 1 lakh plus INR 1 lakh per day for each day of continued failure up to a maximum of INR 1 crore.
- Failure to maintain books of account or records - Penalty: Not less than INR 1 lakh plus INR 1 lakh per day for each day of continued failure, up to a maximum of INR 1 crore.
Section 15B: Failure to enter into an agreement with a client, by a registered intermediary who is required to do so under the Act, - Penalty: Not less than INR 1 lakh plus INR 1 lakh per day for each day of continued failure, up to a maximum of INR 1 crore.
Section 15C: Failure by a listed company or registered intermediary to redress investors' grievances within the time specified by the Board, after being called upon by the Board to do so - Penalty: Not less than INR 1 lakh plus INR 1 lakh per day for each day of continued failure, up to a maximum of INR 1 crore.
Section 15D:
- Sponsoring or carrying on a Collective Investment Scheme (CIS), including Mutual Funds (MF) without obtaining a Certificate of Registration (CoR), when required to do so - Penalty: Not less than INR 1 lakh plus INR 1 lakh per day for each day of continued failure, up to a maximum of INR 1 crore.

Penalties for Other Contraventions

Section 15HB: Failure to comply with provisions of the SEBI Act, rules or regulations made, or directions issued by the Board, for which no separate penalty has been provided - Penalty: Not less than INR 1 lakh, up to a maximum of INR 1 crore.

Important Definitions

"Computer Contaminant": Defined under Section 43 of the Information Technology Act, 2000.
"Computer Virus": Defined under Section 43 of the Information Technology Act, 2000.
"Damage": Defined under Section 43 of the Information Technology Act, 2000.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

This quiz covers the key provisions and regulations outlined in the SEBI Act of 1992, focusing on SEBI's role in the Indian securities market. It reviews SEBI's powers, responsibilities, and the regulation of various intermediaries and investment schemes.