SEBI

The financial markets can be broadly divided into money market and capital market: Money Market
Money market is a market for debt securities that pay off in the short term

usually less than one year. Money market encompasses the trading and issuance of short-term nonequity debt instruments, including treasury bills, commercial papers, bankers acceptance, certificates of deposits, and so on. Capital Market

Capital market is a market for long-term debt and equity shares. In Capital market the capital funds comprising of both equity and debt are

issued and traded. Capital market can be further divided into primary and secondary markets.
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Secondary Market
Secondary market refers to a market where securities are traded after being

initially offered to the public in the primary market, and/or listed on the stock exchange.

Secondary market comprises of equity markets and the debt markets. Secondary market provides an efficient platform for trading of his

securities.

Difference between Primary Market and Secondary Market

In the primary market, securities are offered to public for subscription, for

the purpose of raising capital or fund.

Whereas, the secondary market is an equity-trading avenue in which the

already existing/pre-issued securities are traded among investors.

The secondary market could be either auction or dealer market. While

stock exchange is the part of an auction market, over-the counter (OTC) is a part of the dealer market.
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Security Exchange Board of India (SEBI)

The SEBI is the regulatory authority established

under Section 3 of SEBI Act, 1992, to protect the interests of the investors in securities and to promote the development of, and to regulate, the securities market and for matters connected, therewith, and incidental, thereto.
Role of SEBI in Regulating Trading in the Secondary

Market
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The following departments of SEBI take care of the activities in the secondary market:

FUNCTIONS OF SECURITY EXCHANGE BOARD OF INDIA

Subject to the provisions of this Act, it shall be the duty of the Board to

protect the interests of the investors in securities and to promote the development of, and to regulate, the securities market, by such measures as it thinks fit; markets;

Regulating the business in stock exchanges and any other securities

Registering and regulating the working of stockbrokers, sub-brokers,

share-transfer agents, bankers to an issue,, registrars to an issue, merchant bankers, underwriters, investment advisors, and such other intermediaries who may be associated with securities markets, in any manner; custodians of securities, FIIs, credit-rating agencies, and such other intermediaries as the Board may, by notification, specify in this behalf; 6

Registering and regulating the working of the depositories, participants,

 Registering and regulating the working of venture capital funds

and collective investment schemes, including mutual funds; Prohibiting fraudulent and unfair trade practices relating to securities markets; Promoting investors education and training of intermediaries of securities markets; Prohibiting insider trading in securities; Regulating substantial acquisition of shares and takeover of companies; Can call for any information from, undertaking inspection, conducting enquiries and audits of the stock exchanges, mutual funds, other persons associated with the securities market, intermediaries, and self-regulatory organisations in the securities market; Can call for any information and any record from any bank or any other authority or board or corporation, established or constituted by, or under any Central, State, or provincial act, in respect of any transaction in securities, which is under investigation or enquiry by the Board;
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 The Registrar to an issue finalizes the list of eligible

allottees after deleting the invalid applications and ensures that the corporate action for crediting of shares to the demat accounts of the applicants is done and the dispatch of refund orders to those applicable are sent. Underwriter : A financial organization that handles sales of new securities which a company or municipality wishes to sell in order to raise money. Typically the underwriters will guarantee subscription to securities say, an issue of equity from the company at a stated price, and are under an obligation to purchase securities upto the amount they have underwritten, should the public not subscribe for the issue
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 When subscribers to a public issue deposit their

application money with the bankers(who are also acting as bankers to that particular issue), they do it with a belief that the bankers will act diligently. If all goes well for the company and its shares get listed, then the bankers to the issue have to transfer the collected application money to the company. However, if the company fails to get the minimum subscription or fails to get its shares listed on a stock exchange for any reason, then the banker has to refund the application money to the public within a stipulated time period. Jaltarang Motels Ltd case - 1995

 Merchant Banker : Any person who is engaged in the

business of issue management either by making arrangement regarding selling, buying or subscribing to securities or acting as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management. Share Transfer Agent : Any person, who on behalf of any body corporate maintains the record of holders of securities issued by such body corporate and deals with all matters connected with the transfer and redemption of its securities. It can also be a department or division (by whatever name called) of a body corporate performing the above activities if, at any time the total number of the holders of securities issued exceed one lakh.
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INVESTOR PROTECTION FUND (IPF)/CUSTOMER PROTECTION FUND (CPF) AT STOCK EXCHANGES

Investor Protection Fund (IPF) is the fund set up

by the stock exchanges, to meet the legitimate investment claims of the clients, of the defaulting members who are not of speculative nature.
SEBI has prescribed guidelines for the utilisation

of IPF at the stock exchanges. Issues of Misuse of the corpus.

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 SEBI Takeover Regulations 2011 Acquisitions of an aggregate of 25 percent or more voting

rights in a target company would require the acquirer to make an open offer. An acquirer holding 25 percent or more voting rights in a target company is allowed to acquire additional voting rights in the target company up to 5 percent within a financial year, without making an open offer. Regardless of the level of shareholding and acquisition of shares, acquisition of control over a target company would require the acquirer to make an open offer.
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 IPO- Insurance Firms Oct 2011 The draft IPO guidelines, which were released in June 2011,

proposed allowing only those companies to raise funds via IPO that are in the business for at least 10 years and have a satisfactory track record of reporting profit at the end of the preceding three years.

Major life insurance companies like HDFC Life, SBI Life, ICICI Prudential and Max New York Life, which have been in the business for over 10 years, have expressed interest in hitting the capital markets after the IPO guidelines for life insurers are out.
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 Mandatory Disclosure : disclose all complaints

received by them (Cos) on their respective websites and in their annual reports in order to increase transparency. Mutual funds cannot invest more than 10 per cent of the total net assets of a scheme in the short-term (< 91 DAYS) deposits of a single bank. The market regulator has also suggested recording the calls of all relationship managers with the customers for auditing and has also proposed periodic auditing and compliance of these new norms.
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 The Risk appetite, investment objective and

affordability of the customer should match with the

product.
National distributors and banks will have to seek an

acknowledgement document from the clients before a client invests in a scheme.

The acknowledgement document will contain the

customer category and a statement of fee earned from a particular product

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