Thursday, 5 December 2019

Unit 13: Regulatory Framework

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                                        Unit 13: Regulatory Framework      

The four main legislations governing the securities market are: (a) the SEBI Act, 1992; (b) the Companies Act, 1956; (c) the Securities Contracts (Regulation) Act, 1956; and (d) the Depositories Act, 1996.

Government has framed rules under the SCRA, SEBI Act and the Depositories Act.

SEBI has framed regulations under the SEBI Act and the Depositories Act for registration and regulation of all market intermediaries, and for prevention of unfair trade practices, insider trading, etc.

The responsibility for regulating the securities market is shared by Department of Economic Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank of India (RBI) and SEBI.
The activities of these agencies are coordinated by the High Level Committee on Capital Markets.

Most of the powers under the SCRA are exercisable by DEA while a few others by SEBI.
The powers of the DEA under the SCRA are also concurrently exercised by SEBI.
The powers in respect of the contracts for sale and purchase of securities, gold related securities, money market securities and securities derived from these securities and ready forward contracts in debt securities are exercised concurrently by RBI.
The SEBI Act and the Depositories Act are mostly administered by SEBI.
The rules and regulations under the securities laws are administered by SEBI.
The powers under the Companies Act relating to issue and transfer of securities and nonpayment of dividend are administered by SEBI in case of listed public companies and public companies proposing to get their securities listed.

The SROs ensure compliance with their own rules as well as with the rules.


Calendar spread: Calendar spread is a spread trade involving the simultaneous purchase of futures or options expiring at particular date and the sale of the same instrument expiring another date.

Companies Act: It deals with the issue, allotment, and transfer of securities, as well as various aspects relating to company management.

214    Financial Derivatives Notes Depositories Act: The Depositories Act, 1996 provides for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed, accuracy, and security.

Margin: A margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty (most often their broker or an exchange).

Over-the-counter (OTC): Over-the-counter (OTC) or off-exchange trading is done directly between two parties, without any supervision of an exchange.

Prevention of Money Laundering Act: The primary objective of this Act is to prevent money laundering, and to allow the confiscation of property derived from or involved in money laundering.

SEBI: The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India.

It was established on 12 April 1992 through the SEBI Act, 1992.

Securities Contracts (Regulation) Act: This Act provides for the direct and indirect control of virtually all aspects of securities trading and the running of stock exchanges.

VaR Margin: VaR Margin is at the heart of margining system for the cash market segment.

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