Sebi Annual Report 2013

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This Report is in conformity with the format as per the Securities

and Exchange Board of India (Annual Report) Rules, 1994,
notlfed ln OgcluI Guzeue on AprlI 7, 1994.
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MEMBERS OF THE BOARD
(As on March 31, 2013)
Appointed under Section 4(1) (a) of the SEBI Act, 1992 (15 of 1992)
U. K. SINHA
CHAIRMAN
Appointed under Section 4(1) (d) of the SEBI Act, 1992 (15 of 1992)
PRASHANT SARAN
WHOLE TIME MEMBER
RAJEEV K. AGARWAL
WHOLE TIME MEMBER
S. RAMAN
WHOLE TIME MEMBER
V. K. JAIRATH
PART TIME MEMBER
P. C. CHHOTARAY
PART TIME MEMBER
Nominated under Section 4(1) (b) of the SEBI Act, 1992 (15 of 1992)
DR. ARVIND MAYARAM
Secretary
Ministry of Finance
Dearlmenl of Iconomic Aairs
Government of India
NAVED MASOOD
Secretary
Minislry of Cororale Aairs
Government of India
Nominated under Section 4(1) (c) of the SEBI Act, 1992 (15 of 1992)
ANAND SINHA
Deputy Governor
Reserve ank of India
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MEMBERS OF THE SEBI BOARD
(As on March 31, 2013)
U. K. SINHA
Chairman
PRASHANT SARAN
Whole Time Member
RAJEEV K. AGARWAL
Whole Time Member
S. RAMAN
Whole Time Member
V. K. JAIRATH
Part Time Member
P. C. CHHOTARAY
Part Time Member
DR. ARVIND MAYARAM
Secretary
Ministry of Finance
Department of Economic
Aairs
Government of India
NAVED MASOOD
Secretary
Ministry of Corporate
Aairs
Government of India
ANAND SINHA
Deputy Governor
Reserve Bank of India
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CHAIRMAN, WHOLE TIME MEMBERS AND
EXECUTIVE DIRECTORS
Left to Right :
Sibing : Shri S. Raman, Whole Time Member; Shri Prashant Saran, Whole Time Member;
Shri U. K. Sinha, Chairman; Shri Rajeev K. Agarwal, Whole Time Member.
Standing : Shri S. Raman, Executive Director; Shri R. K. Padmanabhan, Executive Director;
Shri SVMD Rao, Executive Director; Shri Ananta Barua, Executive Director;
Shri S. Ravindran, Executive Director; Shri J Ranganayakulu, Executive Director;
Shri P K Nagpal, Executive Director.
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CONTENTS
Page No.
i
CONTENTS
Page No.
List of Boxes ..................................................................................................................................... vii
List of Tables..................................................................................................................................... viii
List of Charts ................................................................................................................................... xiii
List of Abbreviations....................................................................................................................... xiv
PART ONE: POLICIES AND PROGRAMMES
1. GENERAL MACRO-ECONOMIC ENVIRONMENT.................................................... 1
2. REVIEW OF POLICIES AND PROGRAMMES.............................................................. 11
I. Primary Securities Market................................................................................................. 11
II. Secondary Securities Market............................................................................................. 18
III. Corporate Debt Market...................................................................................................... 33
IV. Mutual Funds ..................................................................................................................... 34
V. Alternative Investment Funds ......................................................................................... 41
VI. Investment Advisers ......................................................................................................... 41
VII. Foreign Institutional Investors ........................................................................................ 41
VIII. Takeovers.............................................................................................................................. 44
IX. Investor Assistance and Education.................................................................................. 45
X. Legal Framework................................................................................................................ 45
XI. Retrospect and Prospects................................................................................................... 46
PART TWO: TRENDS AND OPERATIONS IN SECURITIES MARKETS
1. PRIMARY SECURITIES MARKET ................................................................................... 51
I. Resource Mobilisation through Public and Rights Issues ........................................... 51
II. Resource Mobilisation through QIP and IPP................................................................. 57
III. Resource Mobilisation through Preferential Allotment ............................................... 58
IV. Resource Mobilisation through Private Placement in Corporate Debt ..................... 59
2. SECONDARY SECURITIES MARKET............................................................................. 60
I. Equity Market in India ...................................................................................................... 60
II. Performance of Major Stock Indices and Sectoral Indices........................................... 64
III. Turnover in the Indian Stock Market .............................................................................. 66
IV. Market Capitalisation......................................................................................................... 68
V. Stock Market Indicators..................................................................................................... 70
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CONTENTS
Page No.
VI. Volatility in Stock Markets................................................................................................ 73
VII. Trading Frequency ............................................................................................................. 75
VIII. Activities of Stock Exchanges ........................................................................................... 76
IX. Dematerialisation................................................................................................................ 77
X. Derivatives Segment........................................................................................................... 80
3. TRENDS IN THE BOND MARKET.................................................................................. 89
I. Corporate Bond Market..................................................................................................... 89
II. Wholesale Debt Market ..................................................................................................... 91
4. MUTUAL FUNDS.................................................................................................................. 92
5. PORTFOLIO MANAGEMENT........................................................................................... 98
6. FOREIGN INSTITUTIONAL INVESTMENT................................................................. 99
7. ALTERNATIVE INVESTMENT FUNDS.......................................................................... 104
8. CORPORATE RESTRUCTURING..................................................................................... 105
PART THREE: REGULATION OF SECURITIES MARKET
1. INTERMEDIARIES ............................................................................................................... 107
I. Streamlining of Registration Process of Intermediaries............................................... 107
II. Registered Intermediaries Other than Stock Brokers and Sub-brokers..................... 107
III. Registration of Stock Brokers............................................................................................ 108
IV. Registration of Sub-brokers............................................................................................... 112
V. Recognition of Stock Exchanges....................................................................................... 112
VI. Memorandum of Understanding (MoU) between Stock Exchanges ......................... 113
VII. Registration of Foreign Institutional Investors and Custodians of Securities.......... 113
VIII. Registration of Collective Investment Schemes............................................................. 114
IX. Registration of Mutual Funds........................................................................................... 114
X. Registration of Venture Capital Funds............................................................................ 115
XI. Fees and Other Charges .................................................................................................... 115
2. CORPORATE RESTRUCTURING..................................................................................... 117
I. Substantial Acquisition of Shares and Takeovers.......................................................... 117
II. Buy-back............................................................................................................................... 117
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CONTENTS
Page No.
3. SUPERVISION....................................................................................................................... 118
I. Promotion and Regulation of Self Regulatory Organisations..................................... 118
II. Inspection of Market Intermediaries ............................................................................... 119
III. Inspection of Depositories................................................................................................. 120
IV. Inspection of Stock Exchanges.......................................................................................... 121
V. Prevention of Money Laundering.................................................................................... 121
4. SURVEILLANCE.................................................................................................................... 124
I. Market Surveillance Mechanism...................................................................................... 124
II. Integrated Market Surveillance System.......................................................................... 125
III. Data Warehousing and Business Intelligence System.................................................. 125
IV. Signihcanl markel movemenls during 2012-13 ............................................................. 125
V. Surveillance Actions ........................................................................................................... 125
VI. Surveillance Measures........................................................................................................ 126
VII. Enforcement Actions .......................................................................................................... 127
5. INVESTIGATION.................................................................................................................. 130
I. Initiation of Investigation.................................................................................................. 130
II. Process of Investigation..................................................................................................... 131
III. Trends in Investigation Cases........................................................................................... 131
IV. Regulatory Action............................................................................................................... 132
V. Follow-up of Investigations .............................................................................................. 136
6. ENFORCEMENT OF REGULATIONS.............................................................................. 136
I. Enforcement Mechanisms ................................................................................................. 136
II. Enquiry and Adjudication ................................................................................................ 139
III. Regulatory Actions against CISs ...................................................................................... 140
7. PROSECUTION..................................................................................................................... 143
I. Trends in Prosecution........................................................................................................ 143
II. Nature of Prosecution........................................................................................................ 146
III. Disposal of Prosecution Cases.......................................................................................... 146
8. LITIGATIONS, APPEALS AND COURT PRONOUNCEMENTS.............................. 146
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CONTENTS
Page No.
9. CONSENT AND COMPOUNDING................................................................................. 148
10. INVESTOR ASSISTANCE AND EDUCATION............................................................. 148
I. Redressal of Investor Grievances ..................................................................................... 148
II. SEBI Complaints Redress System.................................................................................... 150
III. Regulatory action against companies and their directors for
Non-redressal of investor grievances .............................................................................. 150
IV. Issuance of No-ob|eclion Cerlihcale................................................................................ 151
V. SEBI Toll Free Helpline .................................................................................................... 152
VI. Investor Assistance ............................................................................................................ 153
VII. Investor Education Multimedia Campaign................................................................. 153
VIII. Investor Awareness Programs/ Workshops .................................................................. 153
IX. Visit to SEBI ........................................................................................................................ 156
11. RESEARCH ACTIVITIES ................................................................................................... 156
I. Research Inputs................................................................................................................... 157
II. Market Interactions............................................................................................................. 157
III. Risk Management .............................................................................................................. 158
PART FOUR: REGULATORY CHANGES
1. REGULATORY DEVELOPMENTS ................................................................................. 159
I. New Regulations................................................................................................................. 159
II. Amendments to Existing Rules/ Regulations ................................................................ 163
2. SIGNIFICANT COURT PRONOUNCEMENTS............................................................. 168
I. Supreme Court .................................................................................................................... 168
II. High Court........................................................................................................................... 170
III. Securities Appellate Tribunal ........................................................................................... 173
PART FIVE: ORGANISATIONAL MATTERS
1. SEBI BOARD.......................................................................................................................... 178
2. AUDIT COMMITTEE........................................................................................................... 178
3. ORGANISATION RESTRUCTURING CELL ................................................................. 179
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CONTENTS
Page No.
I. LocaI Oces ........................................................................................................................ 179
II. Redesigning SEBI's Role .................................................................................................... 180
4. HUMAN RESOURCES......................................................................................................... 180
I. Sla Slrenglh, Recruilmenl and Deulalion.................................................................. 181
II. enehls ................................................................................................................................. 181
III. Promotions .......................................................................................................................... 181
IV. Slrenglhening of RegionaI Oces ................................................................................... 181
V. Job Rotation ......................................................................................................................... 181
VI. DisciIinary Mauers........................................................................................................... 182
VII. Training and Development ............................................................................................... 182
VIII. Internship............................................................................................................................. 183
IX. Extracurricular activities within SEBI ............................................................................. 183
X. Prizes won............................................................................................................................ 183
XI. Initiatives in the realm of corporate social responsibility............................................ 183
XII. Scheme for recognizing and rewarding academic excellence of
children of employees........................................................................................................ 183
5. NATIONAL INSTITUTE OF SECURITIES MARKETS ............................................... 183
I. School for Securities Education and School for Securities
Information and Research ................................................................................................ 183
II. School for Investor Education and Financial Literacy ................................................. 185
III. School for Regulatory Studies and Supervision............................................................ 186
IV. SchooI for Cerlihcalion of Inlermediaries ...................................................................... 186
V. Inilialives on Informalion and Communicalion TechnoIogy Mauers ....................... 188
6. VIGILANCE CELL................................................................................................................. 189
7. PROMOTION OF OFFICIAL LANGUAGE .................................................................... 189
I. Bilingualisation .................................................................................................................. 189
II. Rajbhasha Competitions and Functions Correspondence in Hindi.......................... 189
III. Aaj Ka Shabd...................................................................................................................... 189
IV. Hindi Noting and Hindi Quotes..................................................................................... 189
V. Rajbhasha Meetings and Seminars ................................................................................. 190
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CONTENTS
Page No.
VI. Hindi Magazine ................................................................................................................. 190
VII. Information Technology and Hindi................................................................................ 190
VIII. Investor Website and SCORES........................................................................................ 190
IX. RegionaI oces ................................................................................................................... 190
8. INFORMATION TECHNOLOGY...................................................................................... 190
I. Strengthening IT Security.................................................................................................. 190
II. Implementation of New Web-Mail .................................................................................. 190
III. Implementation of two factor authentication for secured access to
SEBI Web applications ....................................................................................................... 191
IV. Internet Connectivity to Disaster Recovery Site Chennai .......................................... 191
V. Seuing u of nev IT Infraslruclure al SII LocaI oces .......................................... 191
VI. Enterprise Wide Portal .................................................................................................... 191
9. INTERNATIONAL CO-OPERATION............................................................................... 191
I. Association with IOSCO................................................................................................... 192
II. Association with G20/FSB................................................................................................ 196
III. Joint Forum......................................................................................................................... 196
IV. Bilateral Engagements ...................................................................................................... 167
V. Ministry References- Contribution to various International
Treaties and Dialogues ..................................................................................................... 197
VI. Participation in the International Programs.................................................................. 197
VII. MMoU and MoU Requests .............................................................................................. 198
VIII. Foreign Delegations/Dignitaries to SEBI ....................................................................... 198
IX. Study Tours for Overseas Regulators ............................................................................ 198
10. PARLIAMENT QUESTIONS .............................................................................................. 198
11. RIGHT TO INFORMATION ACT..................................................................................... 199
CHRONOLOGY OF MAJOR POLICY INITIATIVES BY SEBI........................................... 202
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1.1 Business Responsibility Report .................................................................................... 13
1.2 Public issues in electronic form and use of nationwide broker
nelvork of Slock Ixchanges for submiuing aIicalion forms ............................. 15
1.3 Single One Time KYC.................................................................................................... 19
1.4 Dedicated Debt segment on stock exchanges............................................................ 28
1.5 Pre-trade Risk Controls ................................................................................................. 30
1.6 Periodic Call Auction for Illiquid scrips and Extension of
Pre-Open Call Auction Session .................................................................................... 31
2.1 Impact Analysis of policy measures introduced in Primary Market .................... 56
3.1 GuideIines on Idenlihcalion of enehciaI Ovnershi............................................. 123
LIST OF BOXES
Box No. Name Page No. Page No.
viii
LIST OF TABLES
Table No. Name Page No. Page No.
1.1 National Income (at 2004-05 prices) .......................................................................... 2
1.2 GDP (at Factor Cost) by Economic Activity (at 2004-05 prices) ........................... 3
1.3 Index of Industrial Production................................................................................... 4
1.4 Gross Domestic Savings and Investment ................................................................. 6
1.5a Demat Statistics............................................................................................................. 10
1.5b No. of Listed Companies............................................................................................. 10
1.6 Growth of Turnover in Various Segments in Indian Stock Markets ................... 10
1.7 Assets under the Custody of Custodians................................................................. 11
2.1 Resource Mobilisation through Public and Rights Issues ..................................... 51
2.2 SME Platform................................................................................................................ 52
2.3 Sector-wise Resource Mobilisation............................................................................ 53
2.4 Size-wise Resource Mobilisation................................................................................ 54
2.5 Mega Issues in 2012-13 ................................................................................................ 55
2.6 Industry-wise Resource Mobilisation........................................................................ 57
2.7 Resource Mobilisation through QIP and Conforming to MPS through IPP...... 58
2.8 Oer for SaIe lhrough Slock Ixchange Mechanism lo conform lo MIS............ 58
2.9 Resource Mobilisation through Preferential Allotment ......................................... 59
2.10 Private Placement of Corporate Bonds Reported to BSE and NSE...................... 59
2.11 Major Indicators of Indian Stock Markets................................................................ 62
2.12 Major Stock Indices and their Percentage Variation............................................... 64
2.13 Sectoral Stock Indices and their Returns.................................................................. 65
2.14 Exchange-wise Cash Segment Turnover ................................................................. 66
2.15 Turnover at BSE and NSE: Cash Segment................................................................ 67
2.16 City-wise Turnover of Top 20 Cities in Cash Segment during 2012-13.............. 68
2.17 Market Capitalisation at BSE...................................................................................... 69
2.18 Market Capitalisation at NSE..................................................................................... 70
2.19 Select Ratios Relating to Stock Market ..................................................................... 71
2.20 Price to Earnings Ratio ................................................................................................ 71
2.21 Price to Book-Value Ratio............................................................................................ 72
2.22 Average Daily Volatility of Benchmark Indices ...................................................... 73
2.23 Trends in Daily Volatility of International Stock Market Indices during 2012-13 74
ix
LIST OF TABLES
2.24 Trading Frequency of Listed Stocks.......................................................................... 75
2.25 Share of Brokers, Securities and Participants in Cash Market Turnover ............ 76
2.26 Trading Statistics of Stock Exchanges....................................................................... 77
2.27 Turnover of Subsidiaries of Stock Exchanges.......................................................... 78
2.28 Depository Statistics..................................................................................................... 78
2.29 Depository Statistics: Debenture/Bonds and Commercial Paper ......................... 79
2.30 Cities According to Number of DP Locations: Geographical Spread ................. 79
2.31 Trends in Turnover and Open Interest in Equity Derivatives Segment ............. 81
2.32 Product-wise Derivatives Turnover at NSE and BSE............................................. 82
2.33 Trends in Index Futures at NSE and BSE ................................................................ 83
2.34 Trends in Single Stock Futures at NSE and BSE..................................................... 84
2.35 Trends in Index Options at NSE and BSE................................................................ 84
2.36 Trends in Stock Options at NSE and BSE................................................................ 85
2.37 Shares of Various Classes of Members in Derivatives Turnover at
NSE and BSE. ............................................................................................................... 85
2.38 Trends in Currency Derivatives Segment ................................................................ 87
2.39 Product-wise Market Share in Currency Derivatives Volume ............................. 88
2.40 Trends in Interest Rate Derivatives at NSE.............................................................. 88
2.41 Secondary Market: Corporate Bond Trades............................................................. 90
2.42 SeuIemenl of Cororale onds .................................................................................. 90
2.43 Business Growth on the Wholesale Debt Market Segment of NSE..................... 91
2.44 Instrument-wise Share of Securities Traded in Wholesale Debt
Market Segment of NSE ............................................................................................. 91
2.45 Share of Participants in Turnover of Wholesale Debt Market
Segment of NSE............................................................................................................ 92
2.46 Mobilisation of Resources by Mutual Funds........................................................... 93
2.47 Sector-wise Resource Mobilisation by Mutual Funds during 2012-13................ 94
2.48 Scheme-wise Resource Mobilisation and Assets under Management
by Mutual Funds as on March 29, 2013.................................................................... 95
2.49 Number of Schemes by Investment Objective as on March 29, 2013.................. 96
2.50 Trends in Transactions on Stock Exchanges by Mutual Funds............................ 97
2.51 Unil hoIding auern of aII muluaI funds as on March 31, 2013.......................... 98
x
LIST OF TABLES
2.52 Unil hoIding auern of rivale and ubIic seclor muluaI funds
as on March 31, 2013.................................................................................................... 98
2.53 Assets Managed by Portfolio Managers................................................................... 99
2.54 Investment by Foreign Institutional lnvestors......................................................... 100
2.55 Investments by Mutual Funds and Foreign Institutional lnvestors ................... 100
2.56 QFI Investments during 2012-13................................................................................ 101
2.57 Allocation of Debt Investment limits to FIIs and Sub-accounts during 2012-13 101
2.58 Debt Utilisation Status as on March 31, 2013 .......................................................... 102
2.59 Notional Value of Open Interest of Foreign Institutional investors
in Derivatives during 2012-13..................................................................................... 103
2.60 Notional Value of Participatory Notes (PNs) Vs Assets Under
Management of FIIs ..................................................................................................... 103
2.61 Cumulative Net Investments by VCFs and FVCIs ................................................. 104
2.62 Category-wise Investors in VCFs............................................................................... 105
2.63 Trends in Corporate Restructuring ........................................................................... 106
3.1 Registered Intermediaries other than Stock Brokers and Sub Brokers ............... 108
3.1a Intermediaries other than Stock Brokers & Sub-brokers in the
Process of Registration ............................................................................................... 108
3.2 Registered Stock Brokers............................................................................................. 109
3.2a Stock Broker and Sub-Broker Applications under the Process of Registration. 109
3.3 CIassihcalion of Slock rokers in Cash Segmenl on lhe asis of Ovnershi ... 110
3.4 Number of Registered Members in Equity Derivatives Segment ........................ 111
3.5 Number of Registered of Members in Currency Derivatives Segment............... 111
3.6 Registered Sub-Brokers................................................................................................ 112
3.7 Stock Exchanges with Permanent Recognition........................................................ 113
3.8 Renewal of Recognition Granted to Stock Exchanges during 2012-13................ 113
3.9 Number of Registered FIIs, Sub-accounts and Custodians................................... 114
3.9a Status of Registration of FII, Sub-accounts and Custodians during 2012-13 ..... 114
3.10 Mutual Funds Registered with SEBI ......................................................................... 115
3.11 Registered Venture Capital Funds............................................................................. 115
3.12 Fees and Other Charges .............................................................................................. 116
xi
LIST OF TABLES
3.13 Slalus of Drafl Leuer of Oers for Oen Oers hIed............................................ 117
3.14 Oen oers and Ixemlion from Oen Oers....................................................... 117
3.15 Buyback cases during 2012-13.................................................................................... 118
3.16 Inspection of Stock Brokers/Sub-brokers/Clearing Members ............................... 119
3.16a Inspection by Stock Exchange/Clearing Corporation............................................. 119
3.17 Inspection of other Market Intermediaries .............................................................. 120
3.18 Actions against AML/CFT Violations/Discrepancies.............................................. 123
3.19 Surveillance Actions during 2012-13......................................................................... 126
3.20 Investigations by SEBI ................................................................................................. 132
3.21 Nature of Investigations Taken up and Completed ............................................... 133
3.22 Type of Regulatory Actions Taken ............................................................................ 133
3.23 Age-wise Analysis of Enforcement Actions - U/S 11, 11B and 11D of
SEBI Act as on March 31, 2013................................................................................... 137
3.23a Age-wise Analysis of Enforcement Actions - Enquiry Proceedings
as on March 31, 2013.................................................................................................... 138
3.23b Age-wise Analysis of Enforcement Actions - Adjudication Proceedings
as on March 31, 2013.................................................................................................... 138
3.23c Age-wise Analysis of Enforcement Actions - Prosecution Proceedings
as on March 31, 2013.................................................................................................... 139
3.23d Age-wise Analysis of Enforcement Actions Summary Proceedings
under SEBI Act as on March 31, 2013 ...................................................................... 140
3.24 Enquiry and Adjudication Proceedings Initiated during 2012-13........................ 140
3.24a Enquiry and Adjudication during 2012-13............................................................... 140
3.24b Pending Enforcement Actions as on March 31, 2013 ............................................. 140
3.25 Enquiry and Adjudication Proceedings Initiated against other
Intermediaries during 2012-13 ................................................................................... 141
3.26 Prosecutions Launched................................................................................................ 144
3.27 Region-wise Data on Prosecution Cases as on March 31, 2013............................ 144
3.28 Nature of Prosecutions Launched as on March 31, 2013....................................... 146
3.29 Number of Prosecution Cases decided by the Courts as on March 31, 2013 .... 146
3.30 Courl Cases vhere SII vas a Iarly (Sub|ecl Mauer) .......................................... 147
3.30a Status of Court Cases where SEBI was a Party (Judicial Forum) ........................ 147
xii
LIST OF TABLES
Table No. Name Page No.
3.31 Status of Appeals before the Securities Appellate Tribunal.................................. 147
3.31a Disposals of Appeals by Securities Appellate Tribunal......................................... 147
3.32 Status of Appeals Before the Honble Supreme Courts......................................... 148
3.32a Status of Appeals Before the Honble High Courts................................................ 148
3.33 Receipt and Disposal of applications under Consent and
Compounding Process................................................................................................. 149
3.34 Consenl AIicalions hIed vilh SII during 2012-13........................................... 149
3.35 Comounding AIicalions hIed by lhe accused in criminaI courls
during 2012-13............................................................................................................... 149
3.36 Status of Investor Grievances Received and Redressed......................................... 150
3.37 Failure to Redress Investor Grievances: Order passed under section 11B......... 151
3.38 Failure to Redress Investor Grievances: Adjudication Proceedings .................... 151
3.39 Companies Restrained From Accessing the Securities Market............................. 151
3.40 Companies Penalised For Their Failure to Redress Investor Grievances ........... 151
3.41 Trends in Awareness Programs/ Workshops Conducted by SEBI ...................... 153
3.42 Regional Seminars Conducted by SEBI during 2012-13 ........................................ 154
3.43 School Programs Conducted by SEBI during 2012-13 ........................................... 155
3.44 Trends in Financial Education Programs through Resource Persons ................. 155
5.1 Board Meetings during 2012-13 ................................................................................. 178
5.2 Iromolion of SII OciaIs ........................................................................................ 181
5.3 Parliament Queries received/ raised.......................................................................... 198
5.4 Session-wise Parliament Queries received and replied by SEBI during 2012-13 199
5.5 DelaiIs on aearance of SII reresenlalives before various Commiuees ..... 199
5.6 RTI applications and First Appeal to SEBI Appellate Authority.......................... 201
5.7 Appeal before Central Information Commission.................................................... 201
xiii
LIST OF CHARTS
Chart No. Name Page No.
1.1 Share of Components of GDP (at Factor Cost)........................................................ 5
2.1 Share of Broad Category of Issues in Resource Mobilisation............................... 52
2.2 Sector-wise Resource Mobilisation............................................................................ 53
2.3 Movement of Benchmark Stock Market Indices .................................................... 61
2.4 Value traded in Secondary Market............................................................................ 61
2.5 Year-on-Year Returns of International Indices......................................................... 63
2.6 Movement of Sectoral Indices of BSE ...................................................................... 65
2.7 Movement of Sectoral Indices of NSE ..................................................................... 66
2.8 P/E Ratio of International Stock Market Indices .................................................... 72
2.9 Annualised Volatility of International Stock Market Indices ..............................
2.10 Derivatives Turnover vis--vis Cash Market Turnover.......................................... 80
2.11 Product-wise Share in Equity Derivatives Turnover at NSE and BSE................ 82
2.12 Participant-wise average share in F&O equity turnover in 2012-13 ................... 86
2.13 Participant-wise share in equity derivative open interest at NSE
at end of the period...................................................................................................... 86
2.14 Share of Corporate Issuances in Domestic Debt Securities (percent).................. 89
2.15 AUM - GDP Ratio (percent) ....................................................................................... 93
3.1 Percentage Share of Stock Brokers (as on March 31, 2013) ................................... 110
3.2 Percentage Share of Stock Brokers (As on March 31, 2012) .................................. 111
3.3 Investigation Cases....................................................................................................... 131
3.4 Nature of Investigation Cases Taken Up.................................................................. 132
3.5 Investigation Completed............................................................................................. 133
3.6 Type of Regulatory Actions Taken during 2012-13 ................................................ 134
3.7 The trends of phone calls received in SEBI Toll Free Helpline ........................... 152
3.8 The trends of feedback of call received in SEBI Toll Free Helpline .................... 152
3.9 Trends in Financial Education Programs through Resource Persons ................ 156
3.10 The trends of Educational Visit at SEBI.................................................................... 157
This Rcpnrt can a!sn bc acccsscd nn intcrnct hup://www.scbi.gnv.in
This Reorl can aIso be accessed on inlernel hu://vvv.sebi.gov.in
Conventions used in this Report
` : Rupees Billion : Thousand million/hundred crore
Lakh : Hundred thousand NA : Not Available
Crore : Ten million Na : Not Applicable
Million : Ten lakh p.a. : Per annum
Dierences in lolaI are due lo rounding o and somelimes lhey may nol exaclIy add u lo
hundred per cent.
Source of Charts and Boxes where not mentioned, is SEBI.
xiv
ABBREVIATIONS
AA Appellate Authority
AC Assessmenl Commiuee
ADB Asian Development Bank
ADR American Depositary Receipt
AD(s) Authorised Dealer(s)
AGM Assistant General Manager
AI(s) Anchor Investor(s)
AIF(s) Alternative Investment Fund(s)
AMC(s) Asset Management Company/Companies
AMFI Association of Mutual Funds in India
AML Anti-Money Laundering
AIG Asia/Iacihc Grou
AP(s) Authorised Person(s)
AIIC Asia Iacihc Iconomic Co-oeralion
AIRC Asia Iacihc RegionaI Commiuee
ARN AMFI Registration Number
ASBA Application Supported by Blocked Amount
ATR(s) Action Taken Report(s)
AUM Assets Under Management
CS aseI Commiuee on anking Suervision
BCP Business Continuity Plan
BMC Base Minimum Capital
O enehciaI Ovner
BRLM(s) Book Running Lead Manager(s)
BSDA Basic Services Demat Account
BSE Bombay Stock Exchange Limited
BTI Bankers to an Issue
CAD Currenl Accounl Dehcil
CAF(s) Composite Application Form(s)
CAGR Compounded Annual Growth Rate
CAIIO CenlraI Assislanl IubIic Informalion Ocer
CBI Central Bureau of Investigation
CC Clearing Corporation
CBLO Collateralized Borrowing And Lending Obligation
CBSE Central Board of Secondary Education
CCI Competition Commission of India
CD(s) Cerlihcale of Deosil(s)
CDS Credit Default Swaps
xv
ABBREVIATIONS
CDSL Central Depository Services (India) Limited
CIC ConsuIlanl IvaIualion Commiuee
CETTM Centre for Excellence in Telecom Technology and Management
CIIRM Cerlihcale in IinanciaI Ingineering and Risk Managemenl
CFFEX China Financial Futures Exchange
CFA Charted Financial Analyst
CFT Combating Financing of Terrorism
CGM Chief General Manager
CIC Central Information Commission
CIS Collective Investment Schemes
CM Clearing Member
CMC ConsuIlanl Moniloring Commiuee
CMIE Centre for Monitoring Indian Economy
CPE Continuing Professional Education
CPF Customer Protection Fund
CIIO CenlraI IubIic Informalion Ocer
CP(s) Commercial Paper(s)
CRA(s) Credit Rating Agency/Agencies(s)
CRC Conicl ResoIulion Commiuee
CRR Cash Reserve Ratio
CSL Cerlihcale in Securilies Lav
CSI CaIcuua Slock Ixchange
CSO Central Statistical Organisation
CSX Coimbatore Stock Exchange
DC(s) Division Chief(s)
DFIs Development Finance Institutions
DGM Deputy General Manager
DIP Disclosure and Investor Protection
DJIA Dow Jones Industrial Average
DLP Data Leakage Protection
DMA Direct Market Access
DMS Document Management System
DP(s) Depository Participant(s)
DRS Disaster Recovery
DRS Disaster Recovery Site
DSE Designated Stock Exchange
DT(s) Debenture Trustee(s)
DWBIS Data Warehousing and Business Intelligence System
xvi
ABBREVIATIONS
EAG Eurasian Group on Combating Money Laundering and Financing of Terrorism
IC Ixeculive Commiuee
ECS Electronic Clearance Services
ED Executive Director/Enforcement Directorate
IDCI Iquily Derivalive Cerlihcalion Ixaminalion
EFD Enforcement Department
ELSS Equity Linked Saving Scheme
IMC Imerging Markels Commiuee
EMDE(s) Emerging Market and Developing Economy/Economies
EPFO Employee Provident Fund Organisation
IRO Iaslern RegionaI Oce
ESOP Employee Stock Ownership Plan
ESOS Employee Stock Option Scheme
ESPS Stock Purchase Scheme
ETF(s) Exchange Traded Fund(s)
ETN(s) Exchange Traded Note(s)
EURO European
EWP Enterprise Wide Portal
F&O Futures and Options
FAQ(s) Frequently Asked Question(s)
FATF Financial Action Task Force
FCCB(s) Foreign Currency Convertible Bond(s)
FDI Foreign Direct Investments
FEMA Foreign Exchange Management Act
FIA Futures Industry Association
FII(s) Foreign Institutional Investor(s)
FIMMDA Fixed Income Money Market and Derivatives Association of India
FINRA Financial Industry Regulatory Authority
FMP(s) Fixed Maturity Plan(s)
IIO(s) Iurlher IubIic Oering(s)/IoIIov-on IubIic Oer
FRRB Financial Reporting Review Board
FRTI Financial Regulators Training Initiative
FSAP Financial Sector Assessment Programme
FSB Financial Stability Board
FSDC Financial Stability and Development Council
FSLRC Financial Sector Legislative Reforms Commission
FSR Financial Stability Report
FSRB FATF-Style Regional Body
xvii
ABBREVIATIONS
FSS Financial Supervisory Service, South Korea
FY Financial Year
FVCI(s) Foreign Venture Capital Investor(s)
HFC(s) Housing Finance Company/Companies
HFT High Frequency Trading
HNIs High Net Worth Individuals
HRD Human Resource Development
G20 Group of Twenty
GAAP(s) Generally Accepted Accounting Principle(s)
GBP British Pound Sterling
GC Global Custodian
GCC Gulf Co-operation Council
GDCF Gross Domestic Capital Formation
GDP Gross Domestic Product
GDR(s) Global Depository Receipt(s)
GDS Gross Domestic Savings/Gold Deposit Scheme
GETF(s) Gold Exchange Traded Fund(s)
GM General Manager
GNI Gross National Income
GoI Government of India
GIZ German Society for International Cooperation
GSE Gauhati Stock Exchange
G-Sec Government Securities
IA Investment Advisers
IAD Investor Awareness Division
IAIS International Association of Insurance Supervisors
IBT Internet Based Trading
ICAI Institute of Chartered Accountants of India
ICAI-FRRB Financial Reporting Review Board of the Institute of Chartered Accountants of
India
ICCL Indian Clearing Corporation Limited
ICDR Issue of Capital and Disclosure Requirements
ICSI The Institute of Company Secretaries of India
ICWAI The Institute of Cost and Work Accountants of India
IDF Infrastructure Debt Fund
IDR(s) Indian Depository Receipt(s)
IFCF India Focus Cardinal Fund
IGRC Inveslor Grievance RedressaI Commiuee
xviii
IIP Index of Industrial Production
IMF International Monetary Fund
IMSS Integrated Market Surveillance System
IMD Investment Management Department
IPF Investor Protection Fund
IPP Institutional Placement Programme
INR Indian Rupee
IOSCO International Organisation of Securities Commissions
IPEF Investor Protection and Education Fund
IPF Investor Protection Fund
IPC Indian Penal Code
IIO IniliaI IubIic Oer
IPS Intrusion Detection and Prevention System
IIV In-Ierson Verihcalion
IRDA Insurance Regulatory and Development Authority
IRM Information Rights Management
IRS Indian Revenue Service
ISD Integrated Surveillance Department
ISE Inter-Connected Stock Exchange
ISIN InlernalionaI Securilies Idenlihcalion Number
IT Information Technology
ITeS Information Technology Enabled Services
ITF Implementation Task Force
JF Joint Forum
JPY Japanese Yen
JSE Jaipur Stock Exchange
KIM Key Information Memorandum
KRA KYC Registration Agency
KYC Know Your Client
LAF Liquidity Adjustment Facility
LECS Local ECS
LES(s) Liquidity Enhancement Scheme(s)
LLP Limited Liability Partnership
LIG Liquehed IelroIeum Gas
LSE Ludhiana Stock Exchange
MAS Monetary Authority of Singapore
MB(s) Merchant Banker(s)
MCA Minislry of Cororale Aairs
ABBREVIATIONS
xix
ABBREVIATIONS
MCR Monthly Cumulative Report
MCX-SX MCX Stock Exchange
MF(s) Mutual Fund(s)
MIDC Maharashtra Industrial Development Corporation
MII(s) Market Infrastructure Institution(s)
MIMPS Manner of Increasing and Maintaining Public Shareholding in Recognised Stock
Exchanges
MMoU Multilateral Memorandum of Understanding
MoF Ministry of Finance
MoU Memorandum of Understanding
MPS Minimum Public Shareholding
MPSE Madhya Pradesh Stock Exchange Limited
MQSOS Median Quarter Sigma Order Size
MSE Madras Stock Exchange
MWPL Minimum Market Wide Position Limit
NASDAQ National Association of Securities Dealers Automated Quotations
NAV Net Asset Value
NCAER National Council of Applied Economic Research
NCD Non Convertible Debenture
NCFE National Centre for Financial Education
NECS National ECS
NEFT National Electronic Fund Transfer
NDP Net Domestic Product
NGO Non-Government Organisations
NHB National Housing Bank
NII(s) Non-Institutional Investor(s)
NISM National Institute of Securities Markets
NNI Net National Income
NoC No Ob|eclion Cerlihcale
NRI(s) Non-Resident Indian(s)
NRO Norlhern RegionaI Oce
NSCCL National Securities Clearing Corporation Limited
NSDL National Securities Depository Limited
NSE National Stock Exchange of India Limited
NSFE National Strategy for Financial Education
NSMD Network for Securities Markets Data
ODI Oshore Derivalives Inslrumenl
QARC QuaIihed Audil Reviev Commiuee
xx
QDI QuaIihed Deosilory Iarlicianl
OECD Organisation for Economic Co-operation and Development
OFCD(s) Optionally Fully Convertible Debenture(s)
OIS Oer for SaIe
OIAI Oce of Inveslor Assislance and Iducalion
OMO Open Market Operations
OTC Over the Counter
OTCEI Over the Counter Exchange of India
P.A. Per Annum
PAN Permanent Account Number
P/B Ratio Price to Book-Value Ratio
P/E Ratio Price to Earnings Ratio
PCD Partly Convertible Debenture
PCI Press Council of India
PF(s) Provident Fund(s)
PFI Public Financial Institution
PFUTP Prohibition of Fraudulent and Unfair Trade Practices relating to Securities
Market
IGCSM Iosl Graduale Cerlihcale in Securilies Markels
PGPSM Post Graduate Programme in Securities Markets
PIT Prohibition of Insider Trading
IMAC Irimary Markel Advisory Commiuee
PFRDA Pension Fund Regulatory and Development Authority
PMLA Prevention of Money Laundering Act
IO IrocIaimed Oender
PoS Points of Service
PID Public Interest Directors
PN Participatory Notes
ISC Iro|ecl Sleering Commiuee
PSE Pune Stock Exchange
PSUs Public Sector Undertaking(s)
ODI(s) Oshore Derivalive Inslrumenl(s)
QII(s) QuaIihed Ioreign Inveslor(s)
OIS Oer for SaIe
QI(s) QuaIihed InslilulionaI uyer(s)
QII(s) QuaIihed Inslilulions' IIacemenl(s)
RAIN Registrars Association of India
RBI Reserve Bank of India
RCG RegionaI Commiuee Grou
RDDBFI Recovery of Debts due to Banks and Financial Institutions
ABBREVIATIONS
xxi
RE Revised Estimate
RECS Regional ECS
RIIR ReaI Ieclive Ixchange Rale
RGESS Rajiv Gandhi Equity Savings Scheme
RHP Red Herring Prospectus
RII Retail Individual Investors
RMRC Risk Managemenl Reviev Commiuee
RI Rigorous Imprisonment
RP(s) Resource Person(s)
RRD Regulatory Research Division
RSE(s) Regional Stock Exchange(s)
RTI/STA(s) Registrar to an Issue and Share Transfer Agent(s)
RTI Right to Information
SA(s) Sub Account(s)
SAARC South Asian Association for Regional Co-operation
SARFAESI Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act
SAT Securities Appellate Tribunal
SAST Substantial Acquisition of Shares and Takeovers
SCI SchooI for Cerlihcalion of Inlermediaries
SCS(s) SeIf Cerlihed Syndicale ank(s)
SC(R)A Securities Contracts (Regulation) Act
SCRR Securities Contracts (Regulation) Rules
SCORES SEBI Complaints Redress System
SCM Self Clearing Member
SCN Show Cause Notice
SEBI Securities and Exchange Board of India
SEBON Securities Board of Nepal
SEC Securities and Exchange Commission
SECC Stock Exchanges and Clearing Corporations
SI Simple Imprisonment
SICCI Securilies Inlermediaries ComIiance (Non-Iund) Cerlihcalion Ixaminalion
SID Scheme Information Document
SIEFL School for Investor Education and Financial Literacy
SLB Securities Lending and Borrowing
SLR Statutory Liquidity Ratio
SMAC Secondary Markel Advisory Commiuee
SME Small and Medium Enterprises
SOP Statement of Purpose
SPV(s) Special Purpose Vehicle(s)
ABBREVIATIONS
xxii
SRO Soulhern RegionaI Oce
SRO(s) Self Regulatory Organisation(s)
SRSS School for Regulatory Studies and Supervision
SSE School for Securities Education
SSIR School for Securities Information and Research
STT Securities Transaction Tax
STWT Securities Trading using Wireless Technology
SWF Sovereign Wealth Funds
TAC TechnicaI Advisory Commiuee
T-Bills Treasury Bills
TC TechnicaI Commiuee
TER Total Expense Ratio
TM Trading Member
TRAC Takeover ReguIalions Advisory Commiuee
T to T Trade-to-Trade
UAT User Acceptance Test
UCC Uniform Commercial Code
UCR Uniform Conhrmalion Receil
UIDAI Unique Idenlihcalion Aulhorily of India
UIN Unique Identity Number
UK United Kingdom
UISI Uuar Iradesh Slock Ixchange Limiled
USA United States of America
USD United States Dollar
USE United Stock Exchange
USIBC US-India Business Council
UTI Unit Trust of India
UTI MF UTI Mutual Fund
VaR Value at Risk
VPN Virtual Private Network
VCF(s) Venture Capital Fund(s)
WDM Wholesale Debt Market
WFE World Federation of Exchanges
WGFI Working Group on Foreign Investment
WPI Wholesale Price Index
WRO Weslern RegionaI Oce
WTM Whole Time Member
XBRL eXtensible Business Reporting Language
ABBREVIATIONS
1
Part One: Policies and Programmes
PART ONE: POLICIES AND PROGRAMMES
The Annual Report of the Securities
and Exchange Board of India (SEBI) for the
year 2012-13 encompasses the developments
in capital markets in the wake of early
deterioration and later recovery of the global
economic condilions. As lhe hnanciaI markels
deeen, hnanciaI reforms become imminenl.
SEBI Annual Report for 2012-13 keeps
in view the developments in the world
economy while aligning them with the
stated objectives of SEBI. As per the format
prescribed by the Securities and Exchange
Board of India (Annual Report) Rules, 1994,
SEBI Annual Report for 2012-13 elaborates
on the policies and programmes undertaken
during the year to strengthen the Indian
regulatory framework of Capital markets.
SEBI continued to ensure its commitment
lo fuIhII lhree slalulory ob|eclives, nameIy:
(a) protection of the interests of investors in
securities, (b) promotion of the development
of the securities market and (c) regulation of
the securities market.
SEBI achieves its objectives through
proactive supervision and policy measures.
The major policy issues are discussed in
public domain through discussion papers.
The decisions arrived pursuant to a thorough
examination are placed on the website along
with the agenda papers of the Board. The
various quasi-judicial orders passed by the
Board are also posted on the website.
In line with the stated objectives, this
Report provides the manner in which SEBI
discharged its responsibilities and exercised
its powers during the year in furtherance of
the objectives enshrined in (a) the Securities
and Exchange Board of India Act, 1992, (b)
the Securities Contracts (Regulation) Act,
1956 (c) the Depositories Act, 1996 and (d)
the relevant provisions of the Companies
Act, 1956. It also takes a view of the global
background relevant to these developments.
1. GENERAL MACRO-ECONOMIC
ENVIRONMENT
After the setback in 2011-12, the
early 2012-13 marked a more pronounced
deterioration in activity across the globe. The
recovery however became imminent as credit
markets healed in US and short term risks
in the Euro area trimmed. While investment
dipped, consumption picked up across
the globe in varied measures slowly in
advanced economies and steadily in emerging
markets. Prudent macroeconomic policies
have been leading the way to recovery across
the economies.
Financial markets have boosted the
economic activity and the broad markets
have rallied in late 2012-13. Rate cuts have
been induced to combat slowdown by many
central banking authorities. Back at home,
weakening of growth in industrial and
services sector earmarked one of the lowest
growth rates in recent times. The ushering of
reform measures in lhe Iauer haIf of lhe hscaI
year has reneved inveslor conhdence and
searheaded lhe raIIy in hnanciaI markels.
The growth rate which had declined
in 2011-12 to 6.2 percent continued further
southward in 2012-13 and the provisional
estimates put it at a decadal low rate of 5.0
percent. Gross Domestic Product (GDP)
estimates at factor cost at constant (2004-05)
prices for FY13 is likely to be ` 55,05,437
crore as against ` 52,43,582 crore for FY12
and the growth is expected to be 5.0 percent
as compared to 6.2 in FY12. (Table1.1)
While the previous year witnessed
Services sector supporting the growth
rate amidst the stagnation prevailing in
AgricuIlure and Induslry, lhe currenl hscaI
year saw all the three sectors losing the
momenlum. GIobaI hnanciaI voes and lhe
domestic concerns seem to have dampened
2
Annual Report 2012-13
the economic expansion much in the 2012-13
as compared to the previous year. Agriculture
growth rate fell from 3.6 percent in 2011-12
to 1.9 percent in 2012-13. Industry recorded a
growth of 1.2 percent in 2012-13 as compared
lo a rale of 2.7 ercenl in lhe revious hscaI
year. Services sector recorded sluggish
growth on account of falling export of IT/ITeS
and is expected to be 6.8 percent for 2012-13
while it stood at 7.9 percent for 2011-12.
Agriculture
Agriculture is expected to show a
growth of 1.9 percent in 2012-13 as opposed
to a growth of 3.6 percent seen in 2011-12.
The deceleration in the sector may be a result
of an expected decline in production of food
grains around by 2.8 percent this year as
compared to a growth of 5.2 percent in the
revious year. The dehcil and Iov inlensily
of monsoon has hit the production of rabi
and kharif crops alike. The agriculture sector
in India today stands at a point where the
further development depends upon the
reforms undertaken to improve efficiency
and productivity along with investments in
agriculture. (Table 1.2)
The share of agriculture in the GDP is
further expected to reduce from 14.1 percent
in 2011-12 to 13.7 percent in 2012-13. The 11th
hve year Ian (2007-12) achieved an average
growth rate of 3.3 percent against the target
Table 1.1: National Income (at 2004-05 prices)*
(` crore)
2010-11** 2011-12 2012-13
Item (2
nd
Revised (1
st
Revised (Provisional
Estimate) Estimate) Estimate)
1 2 3 4
A. Estimates at Aggregate Level
1. National Product
1.1 Gross National Income (GNI) at factor cost 4,882,249 5,196,848 5,449,104
8.8% 6.4% 4.9%
1.2 Net National Income (NNI) at factor cost 4,310,195 4,572,075 4,766,754
8.7% 6.1% 4.3%
2. Domestic Product
2.1 Gross Domestic Product (GDP) at factor cost 4,937,006 5,243,582 5,505,437
9.3% 6.2% 5.0%
2.2 Net Domestic Product (NDP) at factor cost 4,364,952 4,618,809 4,823,087
9.3% 5.8% 4.4%
B. Estimates at Per Capita Level
1. Population (million) 1,186 1,202 1,217
1.4% 1.35% 1.25%
2. Per Capita NNI at factor cost (`) 36,342 38,037 39,168
7.2% 4.7% 3.0%
3. Per Capita GDP at factor cost (`) 41,627 43,624 45,238
7.8% 4.8% 3.7%
Note: Figures in the parentheses are percentage change over the previous year.
* As per revised CSO nomenclature of Annual GDP Estimates
** Growth rates in 2010-11 are based on growth calculated over 3rd revised estimates of 2009-10
Scurcc. Ccnira| Siaiisiica| O[cc
3
of 4.0 ercenl. WhiIe lhe 12lh hve year Ian
sets the agricultural growth at 4.0 percent,
the crucial factors underpinning the same
would be investments in farm research, rural
infraslruclure and eeclive markel Iinkages.
(Chart 1.1)
Industry
The growth rate in Industry is further
expected to fall to 1.2 percent in 2012-13 from
the 2.7 percent as witnessed in 2011-12. High
interest rates yielded lower investments,
which accompanied with the power cuts,
has inhibited the rise of output. Mining
sector continued registering a downfall of
0.6 ercenl simiIar lo revious hscaI year,
manufacturing fell from 2.7 percent in 2011-12
to a mere 1.0 percent growth in 2012-13.
The IIP figures (Index of Industrial
Production) showed sluggish growth of a
mere 1.0 percent in 2012-13 when compared
with 2.9 percent as recorded in 2011-12. The
sector seems to be grappling with the dearth
of investments in light of tightened monetary
stance. (Table 1.3) The index of eight core
industries (37.9 percent weight in IIP) grew
by 3.2 percent in 2012-13 as compared to 5.0
percent in 2011-12.
Mining registered a decline of 2.5
percent in 2012-13 as against a decline of 1.9
percent in 2011-12 and has been largely at
the root of contraction of industrial output
(index for 11 out of 12 months has shown
negative growth) on account of the domestic
issues of allocation, production and pricing of
minerals. Reforms in the areas of auctioning,
fuel supply agreements and grading of coal
as per international standards are expected
to usher in the much needed impetus to the
sector.
Table 1.2: GDP (at Factor Cost) by Economic Activity (at 2004-05 prices)*
(` crore)
2010-11 2011-12 2012-13 Percentage Change over
Industry (2
nd
Revised (1
st
Revised (Provisional Previous Year
Estimate) Estimate) Estimate)
2011-12 2012-13
1 2 3 4 5 6
1. Agriculture, Forestry & Fishing 7,13,477 7,39,495 7,53,610 3.6 1.9
2. Mining and Quarrying 1,08,938 1,08,249 1,07,619 -0.6 -0.6
3. Manufacturing 8,01,476 8,23,023 8,31,648 2.7 1.0
4. Electricity, Gas and Water Supply 92,773 98,814 1,02,918 6.5 4.2
Industry (2+3+4) 10,03,187 10,30,086 10,42,185 2.7 1.2
5. Construction 3,90,692 4,12,412 4,30,277 5.6 4.3
6. Trade, Hotels, Transport and
Communication 13,45,660 14,40,312 15,32,034 7.0 6.4
7. Financing, Insurance, Real Estate
and Business Services 8,49,632 9,48,808 10,30,684 11.7 8.6
8. Community, Social and Personal Services 6,34,358 6,72,469 7,16,645 6.0 6.6
Services (5+6+7+8) 32,20,342 34,74,001 37,09,640 7.9 6.8
GDP at Factor Cost 49,37,006 52,43,582 55,05,437 6.2 5.0
Ncic. Ccnsiruciicn as pcr |B| c|assicaiicn ccncs un!cr scrticcs sccicr.
* As per revised CSO nomenclature of Annual GDP Estimates
4
Manufacturing, which contributes 75
ercenl lo lhe III, uclualed during lhe year
and showed a growth of 1.2 percent for 2012-
13 as against 3.0 percent in 2011-12.While
power outages have hampered the sector
recently, the growth in the sector is imminent
and desired to improve the contribution of
the sector from a current 15-16 percent of the
GDP to 25 percent of the GDP by 2022 as laid
out in the National Manufacturing Policy.
Electricity posted a lower growth of
4.0 percent in 2012-13 while the growth in
2011-12 was 8.2 percent, thus interrupting
the growth trajectory of over seven years
displayed by the sector. The sector seems
to be affected by the supply constraints.
El ec t r i c i t y gener at i on al ong wi t h
manufacturing leads the path for industrial
expansion and the reforms in power sector
may be requisite to address the growing gaps.
Services
Services sector has over a decade
remained at the forefront of Indias growth
rate. Its share in the GDP has risen from 65.2
percent in 2010-11 to 66.3 percent in 2011-12
and further to 67.4 percent in 2012-13. The
growth in the sector is expected to be 6.8
percent in 2012-13 as compared to 7.9 percent
in 2011-12.
The Community, Social & Personal
Services sub sector is anticipated to grow at
6.6 percent in the current year compared to
6.0 percent of the last year. The Financing,
Insurance, Real Estate and Business Services,
meanwhile, is poised to show a 8.6 percent
growth as compared to 11.7 percent exhibited
Iasl year, reecling lhe gIobaI uncerlainly.
While Community, Social & Personal
Services contributes 13.0 percent to the GDP,
the Financing, Insurance, Real Estate and
Business Services contributes 18.7 percent.
(Chart 1.1)
Tr a de , Ho t e l s , Tr a ns po r t &
Communication sub sector posted a growth
of 6.4 percent in 2012-13 as opposed to 7.0
percent in 2011-12, while its share in the GDP
remains roughly at 27 percent. The decline
comes as a result of fall in passenger and
cargo handled in civil aviation along with
cargo handled at major sea ports. Commercial
vehicles too have seen a slump in sales as a
result of faltering growth. Construction sub
sector is expected to grow at 4.3 percent in
2012-13 against 5.6 percent in the previous
Table 1.3: Index of Industrial Production (Base: 2004-05=100)
Mining Manufacturing Electricity General
Month (141.57) (755.27) (103.16) (1000.00)
2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13
Average
Apr-Mar 128.5 125.3 181 183.1 149.3 155.2 170.3 172
Growth over the
corresponding period of
previous year
Mar -1.1 -2.9 -3.6 3.2 2.7 3.5 -2.8 2.5
Apr-Mar -1.9 -2.5 3 1.2 8.2 4 2.9 1
5
hscaI year, in aIignmenl vilh lhe vuInerabiIily
they exhibit on global scenario.
Savings & Investments
The latest data of CSO points to a
decrease in Indias Gross Domestic Savings
as a percentage of GDP at market prices
from 34.0 percent in 2010-11 to 30.8 percent
in 2011-12 (TabIe 1.4). The share of hnanciaI
assets in Household savings decreased to 8.0
percent in the 2011-12 from 10.4 percent in
the previous year. This is the lowest when
comared vilh dala of hnanciaI savings over
a decade. Financial Savings since 2000 have
always contributed over 10 percent barring
the year 2004-05, which saw a share of 9.8
percent. In light of the decreased share of
hnanciaI savings, il aIso vorlhvhiIe lo nole
that the share of savings in physical assets
is currently the highest since 2000 at 14.3
percent. The saving pattern seems to be
roeIIed by lhe rising inalion aIong vilh
growing growth concerns that has resulted
in reduced reaI rale of relurn on lhe hnanciaI
savings. Investors have hence chosen to invest
in physical assets like gold that seems to be a
safe haven for investment by households.
With the share of Household Savings being
above 22 ercenl since 2001-02, auracliveness
of investors to physical assets always seem to
negaliveIy imacl lhe hnanciaI inveslmenls,
indicating that some substitution takes place
between the two kinds of savings. (Table 1.4)
While its not only the Household
Savings that have declined, the Private
Corporate and Public Sector Savings have
also reduced in 2011-12. While the Private
Corporate Savings have decreased marginally
from 7.9 percent in 2010-11 to 7.2 percent in
2011-12, public sector savings have halved to
1.3 percent in FY12 when compared with 2.6
percent in FY11. A slowdown in industrial
sector along with high interest payments
and high input costs impact the level of
Private Corporate Savings and consequently
its industrial revival may be a pre condition
to the improvement in the rate of Private
Corporate Savings.
6
In absolute terms, Gross Domestic
Saving (GDS) at current prices in 2011-
12 stood at ` 27,65,291 crore as against
` 26,51,934 crore in 2010-11, registering a
growth of 4.3 percent. Household savings
increased by 9.3 percent from ` 18,32,901
crore in 2010-11 to ` 20,03,720 crore in 2011-
12. While absolute Savings in Physical Assets
increased by 25.3 percent from ` 10,24,567
crore in 2010-11 to ` 12,84,191 crore in 2011-
12, the Financial Savings shrunk by 11.0
percent from ` 8,08,334 crore to ` 7,19,529
crore for the corresponding time period.
Private Corporate Savings moved up by 4.1
percent in absolute terms from ` 6,19,370
crore in 2010-11 to ` 6,44,473 crore in 2011-12.
Public Sector Savings dwindled to ` 1,17,097
crore in 2011-12 from ` 1,99,662 crore in 2010-
11 registering a decline of 41.4 percent.
Table 1.4: Gross Domestic Savings and Investment
Amount in ` crore (Percent of GDP at current
S. market prices)
No. Item 2008-09 2009-10 2010-11 2011-12 2008-09 2009-10 2010-11 2011-12
(3
rd
RE) (2
nd
RE) (1
st
RE) (3
rd
RE) (2
nd
RE) (1
st
RE)
1 2 3 4 5 6 7 8
9
1 Household Saving 13,30,872 16,30,799 18,32,901 20,03,720 23.6 25.2 23.5 22.3
of which :
a) Financial Assets 5,71,026 7,74,753 8,08,334 7,19,529 10.1 12.0 10.4 8.0
b) Physical Assets 7,59,846 8,56,046 10,24,567 12,84,191 13.5 13.2 13.1 14.3
2 Private Corporate
Saving 4,17,467 5,40,955 6,19,370 6,44,473 7.4 8.4 7.9 7.2
3 Public Sector Saving 54,280 10,585 1,99,662 1,17,097 1.0 0.2 2.6 1.3
4 Gross Domestic Saving 18,02,619 21,82,338 26,51,934 27,65,291 32.0 33.7 34.0 30.8
5 Nel CailaI Inov 1,28,760 1,80,794 2,19,715 3,76,174 2.3 2.8 2.8 4.2
6 Gross Domestic Capital
Formation 19,31,379 23,63,132 28,71,649 31,41,465 34.3 36.5 36.8 35.0
7 Total Consumption
Expenditure (a+b) 38,64,617 44,78,717 52,40,922 60,98,896 68.6 69.1 67.2 68.0
a) Private Final
Consumption
Expenditure 32,49,284 37,07,566 43,49,889 50,56,219 57.7 57.2 55.8 56.3
b) Government Final
Consumption
Expenditure 6,15,333 7,71,151 8,91,033 10,42,677 10.9 11.9 11.4 11.6
Memo Items
Saving-Investment
Balance (4-6) -1,28,760 -1,80,794 -2,19,715 -3,76,174 2.3 2.8 2.8 4.2
Public Sector Balance# -4,77,450 -5,82,203 -4,54,297 -5,88,111 8.5 9.0 5.8 6.6
Private Sector Balance# 3,52,179 5,29,599 3,86,653 4,14,944 6.3 8.2 5.0 4.6
a) Private Corporate
Sector -2,18,847 -2,45,154 -4,21,681 -3,04,585 3.9 3.8 5.4 3.4
b) Household Sector 5,71,026 7,74,753 8,08,334 7,19,529 10.1 12.0 10.4 8.0
Ncic. || |ctisc! |siinaics, -. |ntcsincni gurcs arc nci a!jusic! jcr crrcrs an! cnissicns.
7
The savings-investment gap has widened
to 4.2 percent of GDP at market prices in
2011-12, up from being 2.8 percent in the
revious hnanciaI year. WhiIe lhe Savings has
decreased, there has not been a proportionate
decrease in investment in recent times, a
result of which has been heavy reliance
on cailaI inovs vhich increased by 71.2
ercenl. So vhiIe lhe hscaI dehcil vouId need
to be reduced to stimulate public savings,
domestic savings would also need to be
channelized to meet the growing investment
demands of lhe economy vilhoul inaling
lhe currenl accounl dehcil.
Currcnt Accnunt Dccit and Fisca! Dccit
India currently encounters the dilemma
of lvin dehcils. WhiIe lhe dehcils vere laken
in the stride of growth as nation progressed,
lately the burgeoning number has posed a
number of problems both for the economy
and polity alike. Given the Indian economys
resurgent nature, a comfortable level of both
is desired as well essential.
Current Account Deficit (CAD) was
4.8 percent (USD 87.8 billion) of GDP, way
above its comfortable range of 2.5 3.0
percent. However, Financial Inflows to
the tune of USD 85.4 billion during the
hnanciaI year have ensured lhal lhe Currenl
Accounl Dehcil is nol bridged by lhe foreign
exchange reserves. It may be noted that
vhiIe lhe dehcils have soared lhe foreign
flows have increased when compared to
the corresponding period of previous year
(USD 80.7 billion). The surge in portfolio
investments has outperformed the decline
in direct investment hence causing the net
hnanciaI inovs lo increase.
The burgeoning CAD has been fuelled
by soaring Oil and Coal Imports, Gold Rush
and Slowdown in exports. Oil bill contributes
majorly to the imports. With oil marketing
comanies being ermiued lo raise dieseI
prices along with the move to cap the number
of subsidized cylinders during the year would
ensure some relief in the near future. Hike
in Gold Import duties is a stepping stone to
contain Indias increasing appetite of gold.
With respect to Coal imports, it would be
interesting to note that while India ranks
5th with 7.0 percent of global coal reserves,
it remains the fourth biggest importer of the
fuel. An upturn in the mining sector is hence
not only imperative for the import bill to
decline but also for the manufacturing sector
to gain momentum in India from the current
lag.
High CAD may also symbolize the gap
in Savings and Investments in the country.
While Savings in general and financial
savings in particular have decimated, the
investment has not decreased proportionately.
This in turn has been at the root of higher
governmenl dehcil vhich in lurn has Ied
to higher demand which is being viciously
supported by imports instead of domestic
capacity development and exports.
As against the Revised Estimates 2012-13
for IiscaI Dehcil al ` 5,20,925 crore, lhe hgure
for 2012-13 constituted 94 percent and as a
resuIl lhe IiscaI Dehcil for 2012-13 has seuIed
at 4.9 percent of GDP as against the Revised
Estimates of 5.2 percent. Revenue Deficit
has a ma|or share in lhe IiscaI Dehcil vhich
points to a higher revenue expenditure. Over
the years while revenue expenditure has been
increasing as proportion of GDP (12.8 percent
of GDP as per Revised Estimates 2012-13), the
Capital Expenditure seems to have shrunk.
This combined with dependence of CAD
hnancing lhrough foreign inovs may be
a potential cause of concern for the policy
makers. Interest payments and subsidies add
8
u signihcanlIy lo lhe Revenue Ixendilure
and an improvement seems to be due.
The foreign exchange reserves stood
at USD 292.6 billion in end March 2013
compared to USD 294.4 billion as of end
March 2012.
Indian scene in the wake of these two
deficits is apprehensive of the financial
instability in the economy. CAD in absolute
terms pose no risk of any kind but when seen
against the backdrop of varied factors may
be a potential weak spot. In Indian context,
as Iong as lhe CAD is being hnanced by lhe
foreign ovs and nol dravn uon reserves,
the situation remains balanced but given the
nalure of orlfoIio ovs vhich is increasing,
any adverse global development may trigger
abrupt stoppage in inflows which would
affect the Consumption, Investment and
Expenditure. Notwithstanding the fact that
lhe silualion loday is very dierenl vilh high
foreign exchange reserves, depreciated but
stable currency and healthy credit growth,
it still remains crucial for the economy to be
proactively monitoring the developments.
Liquidity
Liquidity conditions altered during the
year 2012-13 that started with tighter liquidity
conditions prevalent in the economy. The past
measures of policy rate cuts in the previous
fiscal yielded results in the latter part of
Q1 2012-13 through Q2 but the liquidity
conditions tightened again in November
2012 driven by buildup of government cash
balances and the gap in credit and deposits
growth. The global fears of tighter liquidity
in the event of withdrawal of any quantitative
easing have also added to the prevalence
of tighter liquidity predictions ahead. The
monelary lighlening aIIayed lhe inalion and
inalionary lrends of Iale bul lhe diIemma of
lvin dehcils has revenled any furlher cul
in the policy rates apart from the 100 basis
points cut undertaken in 2012-13.
In absence of policy cuts, the cash
reserve ratio (CRR) and statutory liquidity
ratio (SLR) have been tuned to adjust the state
of liquidity. In 2012-13, CRR was reduced by
75 basis points while SLR was reduced by
100 basis points. The open market operations
(OMO) injected primary liquidity of ` 1.5
trillion.
Credit Growth
Non food credit growth registered a
growth of 14.0 percent in 2012-13 when
compared with 16.6 percent recorded in 2011-
12, indicating a slower pace of credit growth.
The credit to Industry slowed to 15.7 percent
in 2012-13 from 20.3 percent in 2011-12 on
accounl of slrucluraI bouIenecks being faced
by the industry. Credit to the Agriculture
meanwhile increased by 8.1 percent in FY 13
as compared to 13.3 percent in FY 12 while
that to the Services sector increased by 13.6
percent as compared to 14.4 percent in the
respective periods.
Tighter liquidity conditions along with the
slowdown in economic activity have prevented
the credit growth to pick up. Deposit growth
loo has been veak in lhe currenl hscaI year,
falling short of the RBI projections.
Inatinn
Post the monetary tightening measures,
the wholesale price index (WPI) showed some
signs of abeyance in 2012-13. The inalion
for 2012-13 was at 7.3 percent as against 8.9
percent registered for 2011-12.
Inalion in rimary arlicIes remained
at 9.8 percent in 2011-12 as well as 2012-13.
SimiIarIy in manufaclured goods inalion
declined from 7.3 percent in 2011-12 to 5.4
9
percent in 2012-13. The fuel group meanwhile
showed a decrease in inflation from 13.9
ercenl in lhe Iasl hscaI in comarison lo 10.3
ercenl in lhe currenl hscaI, as crude rices
dropped.
Consumer Irice Inalion as of March
2013 stands at 10.4 percent compared to
9.4 percent as of March 2012. The index is
a beuer reeclor of lhe food and fueI side
demand pressures which are currently
fueIIing lhe currenl inalion.
Along with these developments in the
path of taming inflation, the sticky food
inalion sliII remains a daunling lask for
the policymakers. The figure for March
2013 was as high as 8.7 percent. Persistent
food inalion on one hand may fueI cooIing
inalion and on lhe olher hand vorsen lhe
chaIIenges of hscaI dehcil and sIov grovlh.
Increasing food suIy aIong vilh ecienl
distribution, storage and productivity hold
the key to the issue in the medium and long
term.
Trade Balance
Exports for 2012-13 stood at USD 300.6
billion, with a decline of 1.8 percent when
compared with a growth of 21.3 percent
recorded in the same period of the previous
year when the exports were USD 305.9
billion. During 2012-13, Imports registered a
mild increase of 0.4 percent compared with a
grovlh of 32.3 ercenl in lhe Iasl hscaI year.
The lrade dehcil for IY13 slood al USD 190.9
biIIion as againsl a hgure of USD 183.4 biIIion
in FY12.
Fall in exports occurred on account of
the global uncertainties. Demand from the
advanced as well as the Emerging market
and developing economies (EMDEs) fell
in wake of the subdued economic activity
in these regions. Import growth softened
with decreasing gold and non-gold non-oil
imports coming steadily at the back of a hike
in customs duty on gold from 4 to 6 percent.
Exchange Rate
The exchange rate declined to ` 54.39
per USD on March 28, 2013, depreciating 6.32
percent over March 30, 2012 when the rate
was ` 51.16 per USD which was a further
decrease from ` 44.65 per USD in March 31,
2011. The average value of rupee per USD
touched an all-time low of ` 57.22 on June
27, 2012.
Tricky ovs and high CAD has made
the Indian rupee vulnerable amidst the Euro
zone uncertainties and modest recovery in
the US.
Capital markets
Indian securities market started the year
2012-13 on a low note following the global
economic signals of 2011-12. The reform
measures undertaken by the government as
well as slender improvements visible in the
global economic condition have however
uplifted the mood in the domestic securities
market. The Sensex which closed at 17,404 on
March 30, 2012 reached 18,836 as on March
28, 2013. It touched the 20,000 mark during
the year, which was last seen in October
2010. Nifty, too, touched the 6,000 mark while
closing at 5,683 on March 28, 2013 while the
hgure for March 30, 2012 vas al 5,296. WhiIe
Sensex registered a growth of 8.2 percent,
Nifty recorded a growth of 7.3 percent. Indian
markets also witnessed the establishment of
a third stock exchange in the country with
nationwide terminal with MCX-SX going live
in equities and equities derivatives segment
on February 11, 2013. The benchmark index,
SX40, is however yet to be disseminated. The
development is testimony to the expanding
Indian markets and their potential and would
10
help in further strengthening the participation
of investors across the country.
The market capitalisation of BSE stood
at ` 63, 87, 887 at end-March 2013 compared
to ` 62, 14,941 crore as of end-March 2012
while its ratio to GDP stood at 63.7 percent
for 2012-13. The market capitalisation of NSE
was ` 62,39,035 at end-March 2013 compared
to ` 60, 96,518 crore as of end-March 2012
while its ratio to GDP stood at 62.2 percent
for 2012-13 The number of demat accounts at
the two depositaries grew by over 5 percent
during lhe hscaI year. The number of Iisled
companies at NSE and BSE continued to rise.
(Table 1.5)
The turnover in the Equity derivative
segment displayed an increase of 20.4 percent
and reached ` 3,87,04,572 crore in 2012-13.
The Currency derivative segment however
declined by 12 percent to ` 87,10,504 crore in
2012-13 despite volatile rupee. (Table 1.6)
The derivative segment developments
may be seen in the light of the Futures
Industry Association (FIA) Annual Volume
Survey 2012 which has reported the biggest
and broadest decline in at least a decade
in the global listed derivatives market.
The total number of futures and options
contracts traded on the exchanges world
over in calendar year 2012 has declined
by 15.3 percent. The survey, nonetheless,
highlights the BSEs volume explosion, which
moved from just three million contracts in
calendar year 2011 to 243.76 million contracts
in calendar year 2012. NSE meanwhile is
ranked third among the top thirty derivative
exchanges in terms of number of contracts
traded or cleared in the calendar year 2012.
Nifty Options have retained their rank as
the worlds second most traded option in
calendar year 2012 as well. In the category
Foreign Exchange Futures & Options
Contracts the U.S. Dollar/Indian Rupee
Iulures al NSI and MCX-SX occuy lhe hrsl
and second position respectively.
The foreign investments in India
contributed by the FII and FDI own assets
under custody valued at ` 15, 77,288 crore for
2012-13, up from ` 13, 39,240 crore in 2011-12.
(Table 1.7).
Table 1.5 (a): Demat Statistics
NSDL CDSL
Demat Demat
Year Quantity Quantity
(million shares) (million shares)
2010-11 4,71,304 1,05,310
2011-12 5,79,801 1,33,570
2012-13 6,86,476 1,51,792
Source: NSDL & CDSL
Table 1.5 (b): No. of Listed Companies
Year NSE BSE
No. of No. of
Companies Companies
listed listed
2010-11 1,574 5067
2011-12 1,646 5133
2012-13 1,666 5,211
Source: NSE & BSE
Table 1.6 : Growth of Turnover in Various
Segments of Indian Stock
Market
Turnover (` crore)
Cash Equity Currency
Year Segment Derivatives Derivatives
(All India) (NSE+BSE+ (NSE+MCX-
MCX-SX) SX+USE)
2010-11 46,82,437 2,92,48,375 76,43,805
2011-12 34,78,391 3,21,58,208 98,96,413
2012-13 32,57,087 3,87,04,572 87,10,504
Source: BSE, NSE, MCX-SX & USE
11
Investor protection has been at the
forefront of the objectives of SEBI and policy
measures have been undertaken in this regard
during the FY13. Framework for registration
and regulation of Investment Advisors has
been notified, SME platforms for equity
hnancing have been inlroduced aIong vilh
reforms in FII investments and many other
policy measures which are discussed in the
forthcoming section.
2. REVIEW OF POLICIES AND
PROGRAMMES
Wilh lhe dynamics in hnanciaI markels
ever changing, the need for an active and
evolving regulatory regime is integral. SEBI
has initiated many policies and programmes
in FY13 which are presented in this Section.
The developments are categorized
under eleven major heads viz., Primary
Securities Market, Secondary Securities
Market, Corporate Debt Market, Mutual
Funds, Alternative Investment Fund,
Investment Advisors, Portfolio Managers,
Foreign Institutional Investors, Takeovers,
Investor Assistance and Education and Legal
Framework. The section concludes with
Retrospect and Prospects.
I. Primary Securities Market
Primary markets play the role of
mobilizing the capital to the corporate both
ubIic and rivale. A heaIlhy and ecienl
rimary markel is reeclive of lhe economic
stability that further accentuates the investor
conhdence in lhe markels. Indian Irimary
markets have seen a revival in the activity
arlIy reecling lhe recovery imminenl in
the global scenario. Resources mobilized in
the primary market have risen by around 20
percent in the wake of the renewed economic
fervor. A total of ` 15,474 crore of Equity
capital has been raised in 2012-13 through
49 issues, compared with ` 12,857 crore
raised through 51 issues in 2011-12. Certain
reforms in policies have been undertaken to
buiId u lhe inveslor conhdence furlher. The
major policy initiatives related to the primary
markel during 2012-13 are as under:
A. Manner of Dealing with Audit Reports
Filed by Listed Companies
A mechanism has been put in place
to process qualified annual audit reports
filed by the listed companies with stock
exchanges and annual audit reports where
accounting irregularities have been pointed
out by the Financial Reporting Review Board
of the Institute of Chartered Accountants of
India (ICAI-FRRB). In order to enhance the
quaIily of hnanciaI reorling done by Iisled
companies, it has been, inter-alia, decided lhal:
a. Listed companies would be required to
hIe annuaI audil reorls vilh lhe slock
Table 1.7: Assets under the Custody of Custodians
FIIS/SAs Foreign FDI Foreign Venture
Year Depositories Investments Capital Investments
Amount (` crore) Amount (` crore) Amount (` crore) Amount (` crore)
2010-11 11,06,550 1,85,931 1,46,231 24,002
2011-12 11,07,399 1,43,370 2,31,841 35,041
2012-13 13,36,557 1,57,159 2,40,731 54,144
Source: SEBI
12
exchanges along with the applicable
forms (Iorm A: 'UnquaIihed' / 'Mauer of
Imhasis Reorl', Iorm : 'QuaIihed' /
Subject To / Except For Audit Report).
b. After preliminary scrutiny and based on
materiality, the stock exchanges would
refer lhese reorls lo SII / QuaIihed
Audil Reviev Commiuee (QARC).
c. QARC represented by ICAI, stock
exchanges, etc. shall review the cases
received from the stock exchanges and
guide SII in rocessing lhe quaIihed
annual audit reports referred by the
stock exchanges
d. Cases, wherein the qualifications are
significant and explanation given by
the company is unsatisfactory, would
be referred to the Financial Reporting
Review Board of ICAI (ICAI-FRRB). If
ICAI-IRR oines lhal lhe quaIihcalion
is |uslihed, SII may direcl lhe said
comany lo discIose lhe eecl of revised
financial accounts by way of revised
ro-forma hnanciaI resuIls immedialeIy
to the shareholders through stock
exchange(s). However, the financial
eecls of lhe revision may be carried oul
in the annual accounts of the subsequent
hnanciaI year as a rior eriod ilem.
B. Mandating Inclusion of Business
Responsibility Report as Part of Annual
Report
SEBI has mandated the top 100 listed
companies to include Business Responsibility
Report as part of Annual Reports with a
focus on the Environmental, Social and
Governance issues. The report would also
include compliance with the nine principles
for business responsibility reporting to
assess compliance with Environmental,
Social and Governance norms. The said
reporting requirement is in line with the
National Voluntary Guidelines on Social,
Environmental and Economic Responsibilities
of usiness (NVGs)' nolihed by lhe Minislry
of Cororale Aairs, Governmenl of India, in
July 2011. (Box 1.1 may be referred for details)
C. Annua! Updatinn nI Ocr Dncumcnt
Listed companies have been mandated
to update their disclosures in the prospectus
on an annual basis and to ensure that the
same is available in public domain. Such
consolidated public disclosures can be used
for lhe urose of IIOs / Righls Issue hIings
through appropriate hyper-links without
requiring a repetition of such disclosures.
D. Revised Timeline for Disclosing
Financial Information Prior to Issue
Opening
Disclosure of price band along with
relevant financial information shall be
published by way of an advertisement at
Ieasl hve vorking days rior lo oening of
an iniliaI ubIic oer as againsl lvo vorking
days prescribed earlier in order to ensure
lhal inveslors gel sucienl lime lo anaIyze
the issue before investing. This information
vouId aIso be re-hIIed in lhe aIicalion
forms available for download from websites
of the stock exchanges.
E. Revised Requirements for the Stock
Exchanges and Listed Companies in
Respect of Scheme of Arrangement
under the Companies Act, 1956
Pursuant to a scheme of reconstruction
or amalgamation being sanctioned by the
Honble High Court under sections 391-
394 or 101 of the Companies Act, 1956,
the companies desirous of getting their
equity shares listed after merger/de-merger/
13
amalgamation, etc. without making an
iniliaI ubIic oer lo lhe ubIic are required
to seek an exemption from SEBI from the
requirements of rule 19(2) (b) of Securities
Contracts (Regulation) Rules, 1957. In terms
of rule 19(7) of SCRR, SEBI has been granting
exemlion from making an iniliaI ubIic oer
to the public under SEBI (Issue of Capital and
Disclosure Requirements) Regulations, 2009 to
such listed companies on a case to case basis.
However, in the recent past, SEBI
has received certain applications, seeking
exemption, containing, inter alia, (a)
inadequate disclosures, (b) convoluted
schemes of arrangement, (c) exaggerated
valuations, etc. In order to avoid such
situations and in the interest of investors,
the requirements have been streamlined
by mandating, inter alia, requirements of
obtaining comments of SEBI on the draft
Box 1.1 : Business Responsibility Report
At a time and age when enterprises are increasingly seen as critical components of the social system, they are
accounlabIe nol mereIy lo lheir sharehoIders from a revenue and rohlabiIily erseclive bul aIso lo lhe Iarger
society which is also its stakeholder. Hence, adoption of responsible business practices in the interest of the social
sel-u and lhe environmenl are as vilaI as lheir hnanciaI and oeralionaI erformance.
Considering the larger interest of public disclosure regarding steps taken by listed companies from a
Environmental, Social and Governance (ESG) perspective, SEBI, vide circular dated August 13, 2012, mandated
inclusion of Business Responsibility Reports (BR Reports) as part of the Annual Reports, initially for top 100 listed
companies based on market capitalization as on March 31, 2012. Other listed companies may voluntarily disclose
BR Reports as part of their Annual Reports.
The framevork for usiness ResonsibiIily Reorling incIudes: generaI Informalion aboul lhe comany, hnanciaI
details of the company, details about subsidiaries, details of directors responsible for BR and also compliance with
lhe nine rinciIes for business resonsibiIily reorling, vhich are as under:
IrinciIe 1: Businesses should conduct and govern themselves with Ethics, Transparency and Accountability
IrinciIe 2: Businesses should provide goods and services that are safe and contribute to sustainability throughout
their life cycle
IrinciIe 3: Businesses should promote the wellbeing of all employees
IrinciIe 4: Businesses should respect the interests of, and be responsive towards all stakeholders, especially those
who are disadvantaged, vulnerable and marginalized
IrinciIe 5: Businesses should respect and promote human rights
IrinciIe 6: usinesses shouId resecl, rolecl, and make eorls lo reslore lhe Invironmenl
IrinciIe 7: usinesses, vhen engaged in inuencing ubIic and reguIalory oIicy, shouId do so in a resonsibIe
manner
IrinciIe 8: Businesses should support inclusive growth and equitable Development
IrinciIe 9: Businesses should engage with and provide value to their customers and consumers in a responsible
manner
The companies are required to report their compliance with the above principles.
Those Iisled comanies vhich have been submiuing suslainabiIily reorls lo overseas reguIalory agencies/
stakeholders based on internationally accepted reporting frameworks need not prepare a separate report for the
purpose of these guidelines but only furnish the same to their stakeholders along with the details of the framework
under which their BR Report has been prepared and a mapping of the principles contained in these guidelines to
the disclosures made in their sustainability reports.
14
schemes of arrangement, disclosure of
draft schemes and observation letters of
stock exchanges on websites for wider
dissemination, furnishing a report on
complaints received on draft schemes, to
the stock exchanges prior to obtaining
observalion Ieuer, elc.
F. Manner of achieving Minimum Public
Shareholding Requirements
In accordance with the provisions of
Securities Contracts (Regulation) Rules, 1957,
SEBI had specified certain means for the
listed companies to achieve minimum public
shareholding requirements. Additionally,
during lhe course of lhe hnanciaI year, SII
has ermiued lhe Iisled comanies lo make
rights or bonus issues to public shareholders,
with promoters/promoter group shareholders
forgoing their entitlement for the purpose
of achieving compliance. Further, it has also
been prescribed that listed entities desirous of
achieving the minimum public shareholding
requirement through other means / relaxation
from the available methods may approach
SEBI with appropriate details.
G. Mandatory Authentication by Listed
Companies on SEBI Complaints
Redress System (SCORES)
With a view to facilitate the processing
of investor complaints in the centralized web
based complaints redress system SCORES,
comanies desirous of geuing lheir equily
shares listed on the stock exchanges were
mandated to obtain authentication on
SCORES, before listing approval is granted
by the stock exchange.
H. Formats for Disclosure of Financial
Results
Iursuanl lo nolihcalion of lhe Minislry
of Cororale Aairs revising lhe formal for
disclosure of Balance Sheet under Schedule
VI of lhe Comanies Acl, 1956, consequenliaI
amendments regarding interim disclosure of
hnanciaI resuIls by Iisled comanies lo slock
exchanges were carried out in the Listing
Agreement.
I. C!aricatinn nn C!ausc 36 nI thc Equity
Listing Agreement
It came to the notice of SEBI that certain
listed companies were giving monthly
disclosure of their sales/turnover/production
figures to their respective trade bodies/
industry associations and the same was
not disclosed to the stock exchanges. It
vas lherefore, cIarihed lhal aII lhe evenls
or material information which will have a
bearing on the performance / operations
of the company as well as price sensitive
informalion shaII be hrsl disseminaled lo lhe
stock exchanges as required under clause 36
of the Listing Agreement.
J. Extending the Reach of ASBA Facility
To make the application process more
convenient for investors, it was decided to
extend the reach of Application Supported
by Blocked Amount (ASBA) by mandating
lhe SeIf Cerlihed Syndicale anks (SCSs) lo
provide the facility in all their branches in a
phased manner.
K. Application Supported by Blocked
Amount (ASBA) Facility against
Funded Deposit Account
SeIf Cerlihed Syndicale anks (SCSs)
were advised to ensure that for applications
made by an investor using Application
Supported by Blocked Amount (ASBA) facility,
the SCSBs shall block the application amount
only against/in a funded deposit account
and also ensure that clear demarcated funds
are available for ASBA applications. Further,
15
SCSBs were also directed to ensure that for
making applications on own account using
ASBA facility, they should have a separate
account in own name with any other SCSB.
L. Public Issues in Electronic Form and
Use of Nationwide Broker Network
of Stock Exchanges for Submitting
Application Form
To widen the distribution network of
public issues, in addition to the existing
channels, the nationwide broker network of
stock exchanges at more than 1000 locations
have been made available for distributing public
issues in electronic form. This mechanism can
be used by the investors to submit both ASBA
and non-ASBA applications. (Box 1.2 may be
referred for details)
M. Eligibility Criteria for IPOs
Eligibility criteria for making initial
ubIic oers (IIOs) for bolh rohl-making
and non-profit making issuers have been
reviewed. The revised criteria require the
issuers lo be rohlabIe for al Ieasl lhree oul
of lhe receding hve years, vilh a minimum
average re-lax oeraling rohl during lhe
lhree mosl rohlabIe years of ` 15 crore, to
be eligible to come out with IPOs through
lhe rohlabiIily lrack record roule. Issuers
not meeting with this requirement may come
out with IPOs, if the issuer undertakes to
aIIol al Ieasl 75 ercenl of lhe nel oer lo lhe
QuaIihed InslilulionaI uyers (QIs).
N. Eligibility Criteria for Further Public
Ocrs and Rights Issucs thrnugh thc
Fast-Track Route
One of the eligibility conditions for well-
established listed companies to come out with
furlher ubIic oers / righls issues lhrough
the fast-track route is to have a minimum
level of average market capitalisation of
Box 1.2 : Public issues in electronic form and use of nationwide broker network
nI 5tnck Exchangcs Inr submiuing app!icatinn Inrms
The Hon'bIe Iinance Minisler announced lhe foIIoving in his seech vhiIe resenling Union udgel 2012-13:
Sinp|ijqing inc prcccss cj issuing |niiia| Pu||ic O[crs (|POs), |cucring incir ccsis an! nc|ping ccnpanics reach more
retail investors in small towns. To achieve this, in addition to the existing IPO process, I propose to make it mandatory
for companies to issue IPOs of Rs.10 crore and above in electronic form through nationwide broker network of stock
exchanges.
Pursuant to the above, in consultation with various market participants, SEBI introduced a new mechanism (e-IPO
facility) to submit application forms in public issues. It is an additional mode for investors to submit applications
using the nationwide stock broker network of Stock Exchanges and where there is a presence of the brokers
terminals (broker centre), who may not be the syndicate or sub-syndicate members in an issue.
Investors can submit both ASBA and non-ASBA applications using e-IPO facility. Application forms can be
downloaded from the Stock Exchanges websites/broker terminals. This will enable the investors to download /
print the forms directly and submit the same to any registered stock broker of the Stock Exchange.
The e-IPO facility to submit applications has been made available in more than 1000 locations. The Stock Exchanges
have disclosed the list of such broker centres, where the applications can be accepted. This has resulted in enabling
investors to submit applications in more than 1000 locations as against less than 100 centers available earlier. This
has enabled small investors in small towns to participate in public issues and also assisted the companies reach
more number of retail investors.
16
public shareholding. This has been brought
down from ` 5000 crore to ` 3000 crore.
O. Minimum Promoters Contribution by
AIFs
Minimum promoters contribution in
IPOs is required to be at least 20 percent of
the post-issue capital. In order to facilitate
capital raising by companies founded by
rofessionaIs / hrsl generalion enlrereneurs,
it has been decided that in case the post-
issue shareholding of the promoter is less
than 20 percent, the Alternative Investment
Funds (AIFs) may contribute for the purpose
of meeting the shortfall in minimum
contribution, subject to a maximum of 10
percent of the post-issue capital.
P. Flexibility to the Issuers and Better
Transparency in Disclosure of Objects
of the Issue
To aIIov more exibiIily lo lhe issuers,
changes up to 20 percent in the amount
proposed to be raised under the objects
of the issue at the red herring prospectus
(RHP) stage, as against the erstwhile 10
ercenl, viII nol necessilale re-hIing vilh
SEBI. Further, deletion of objects of the issue
al lhe RHI slage viII nol lrigger re-hIing,
except in certain cases where SEBI retains
lhe reguIalory discrelion lo require a re-hIing
in case of apparent exacerbation of risk.
Moreover, to bring more transparency in
capital raising, General Corporate Purposes
as an object of the issue has been capped at 25
percent of the proceeds raised by the issuer.
Q. Investment by BRLMs and their
Associates in Public Issues
A Book Running Lead Manager (BRLM)
which is also an associate of the issuer shall
have the restricted role of marketing the issue,
and accordingly declare itself as a Marketing
Lead Manager in the offer document.
However, all the BRLMs to the issue,
including the Marketing Lead Managers, will
sign lhe due diIigence cerlihcale. This viII
bring in ample clarity on the role of a BRLM
who may be an associate of the issuer by way
of adequate disclosures.
R. SEBI Framework For Rejection of Draft
Ocr Dncumcnts Ordcr
In order to protect the interest of
investors who may not always be in a
position to assess the risks associated with a
business model due to complexities involved
therein and to ensure that only reasonably
credible issuers with adequate disclosures in
lheir oer documenls are aIIoved lo access
the public issuances route, a framework for
re|eclion of oer documenls conlaining lhe
illustrative list of objective criteria for the
purpose and consequences of rejection has
been put in place by SEBI.
The draft offer documents would be
scrutinized by SEBI based on broad criteria
including, existence of circular building up
of capital, showcasing enhanced prospects
for issuer by changing accounting policies etc.
and lhe framevork is aIicabIe lo aII oer
documenls hIed for issue of securilies.
S. Decentralisation of Processing of Draft
Offer Documents to the Regional
Omccs nI 5EBI
As a f ur t h e r s t e p t o wa r ds
decentralisation, Regional Offices of SEBI
vere emovered lo rocess lhe drafl oer
documents in respect of issues of size up
to ` 500 crore. Merchant Bankers were
accordingIy advised lo hIe lhe drafl oer
documents / offer documents with the
concerned oce of lhe oard, based on lhe
estimated issue size.
17
T. Revision in Pricing for Qualified
Institutions Placements
To provide flexibility to issuers on
ricing lhe QuaIihed Inslilulions IIacemenls
(QIPs), a maximum discount of 5 percent has
been ermiued lo lhe rice caIcuIaled as er
the SEBI (ICDR) Regulations, 2009, subject
lo arovaI by sharehoIders. This exibiIily
is expected to help issuers carry out QIPs
during volatile markets.
U. Amendments to SEBI (Employee Stock
Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999 and
Equity Listing Agreement
Listed companies were mandated to
frame emIoyee benehl schemes invoIving
securities of the company only in accordance
with the SEBI (ESOS and ESPS) Guidelines,
1999. The companies whose schemes are not
in conformity with the same, have been given
time to align their schemes with the said
guidelines. Further, such schemes have been
prohibited from acquiring securities of the
company from the secondary market.
V. Amendment to SEBI (ICDR) regulations
in Respect of Infrastructure Sector
In order to harmonize the SEBI (ICDR)
Regulations relating to Infrastructure Sector
with the amended Securities Contracts
(Regulation) Rules, 1957, consequential
amendments to SEBI (ICDR) Regulations
pertaining to minimum public shareholding
and minimum subscription requirements
were carried out whereby, such relaxations
granted to infrastructure companies / sector
were withdrawn.
W. Enabling Shareholders to Electronically
Cast their Vote
In order to enable wider participation
of shareholders in corporate proposals, top
500 listed companies were mandated to
enable e-voting facility to their shareholders,
in respect of those businesses which are
transacted through postal ballot by the listed
companies.
X. Partial Two-Way Fungibility of Indian
Depository Receipts
In order to encourage more number of
foreign companies to issue Indian Depository
Receipts (IDRs) in the Indian market and
also to enable the investors to take informed
investment decision, it was decided to enable
partial two-way fungibility of IDRs through
detailed guidelines providing a roadmap for
the future IDR issuances as well as for the
existing listed IDRs.
Y. Mi ni mum Al l ot ment t o Ret ai l
Individual Investors
All retail individual investors (RIIs) shall
be aIIoued al Ieasl lhe minimum aIicalion
size, subject to availability of shares in the RII
category. This would encourage wider retail
participation in public issues. The remaining
available shares, if any, shall be allotted
on a proportionate basis. The minimum
application size for all investors has also
been increased to ` 10,000 - 15,000 as against
` 5,000 - 7,000 prescribed earlier.
Z. Revision of Bidding by Investors
To avoid any misleading signals to retail
investors about the extent of subscription
in the issue, no withdrawal or lowering
of size of bids shaII be ermiued for non-
retail investors at any stage. However, retail
inveslors viII be ermiued lo vilhdrav or
dovnsize lheir bids unliI lhe hnaIisalion of
allotment.
18
II. Secondary Securities Market
Secondary markets are often referred
to as the barometer to a nations health. The
stock prices in FY13 started on a low note
carrying forward the fluctuations of the
asl hnanciaI year bul lhe currenl hnanciaI
year saw the indices scaling new height and
achieving the pre crisis levels. Initiatives have
been laken lo revive lhe inveslor conhdence
and participation which was dampened in
the previous year on global cues. The policy
initiatives taken in the secondary securities
markel for 2012-13 are as under:
A. Centralisation of KYCs of Investors
The system for centralized database
of the KYC records of the clients was made
applicable for new clients who opened
accounts with the intermediaries from
January 1, 2012. But, for convenience of
clients registered prior to January 1, 2012
(hereinafter referred to as existing clients)
and to expand the database of the KYC
records of the entire securities market, it was
decided to upload the KYC details of the
existing clients of the intermediaries in the
system of KYC Registration Agencies (KRAs),
in a phased manner.
The information about the existing
client which is not available as per earlier
KYC norms shall be highlighted in the
KRA system. When the existing client
approaches another intermediary, it shall
be the responsibility of that intermediary
which downloads the data of that client
from the KRA system, to update the missing
information on the KRA system. (Box 1.3 may
be referred for details)
B. Rationalisation of Know Your Client
(KYC) Requirements
During the year, SEBI rationalized the
process of KYC in the interest of investors, the
delaiIs of vhich are given beIov:
a. KYC Requi rement s for Forei gn
Investors
The foreign investors viz. Foreign
Institutional Investors and their Sub Accounts
and QuaIihed Ioreign Inveslors, vere facing
certain difficulties while complying with
KYC requirements because of their status of
overseas location. SEBI vide circular dated
Selember 5, 2012 simIihed and ralionaIized
such requirements by issuing necessary
cIarihcalions. Hovever, lhe inlermediaries
shall conduct ongoing client due diligence
based on the risk profile and financial
position of the clients as prescribed in SEBI
Guidelines.
b. F!cxibi!ity in PAN Vcricatinn
With a view to bring about operational
exibiIily and ease in lhe IAN (ermanenl
account number provided by Income Tax
Aulhorilies) verihcalion rocess, SII vide
circuIar daled }anuary 4, 2013 cIarihed lhal
the intermediaries may verify the PAN of
their clients online at the Income Tax website
instead of insisting on the original PAN cards
from the investors - domestic and foreign
investors.
c. Accepting Aadhaar as Proof of Address
For the convenience of investors, SEBI
in consuIlalion vilh Unique Idenlihcalion
Authority of India (UIDAI), Government of
India, provided vide circular dated August
13, 2012, that the Aadhaar Letter issued
by UIDAI shall be admissible as Proof of
Address also. It was already being recognized
as Proof of Identity. As a result, Aadhaar can
now be used as a proof of identity as well as
of address.
19
Box 1.3 : Single One Time KYC
SII had earIier in lhe year 2011 simIihed lhe norms for lrading accounl oening and slandardized lhe KYC
requirements for investors at the time of opening accounts with the intermediaries in securities markets. This has
also reduced the cost of compliance for both clients and brokers.
Establishment of a centralized KYC Registration Agency (KRA) :
In order lo rovide for cenlraIizalion of lhe KYC records in lhe securilies markel, SII had nolihed lhe SII (KYC
Registration Agency) Regulations, 2011 which provided the framework for the establishment of KYC Registration
Agency (KRA). KRA is an agency which maintains KYC records of the clients of an intermediary at a central place.
This system is compliant with FATF standards and PMLA guidelines.
Bcncts and Icaturcs nI thc KRA systcm arc as undcr :
Avoids duIicalion of Knov Your CIienl (KYC) rocess vilh every inlermediary by crealion of a mechanism
for centralization of the KYC records in the securities market. Once the client has done KYC with one SEBI
registered intermediary, he need not undergo the same process again with another. When customer shifts from
one inlermediary lo anolher, lhe Iauer couId lhen verify and dovnIoad lhe cIienl's delaiIs from lhe exisling
KRA.
Wilh lhe KRA syslem, lhe KYC rocedure couId be comIeled on lhe same day vhen lhe cIienl goes lo anolher
intermediary or mutual fund as compared to 7-10 days earlier. The client can start trading or investment
immediately.
The reguIalions require lhal lhe securily and rivacy of lhe KYC delaiIs oblained from lhe cIienls shaII be
ensured by the KRA.
If cIienl is nol salished vilh lhe services of one inlermediary, he can easiIy move lo anolher, vilhoul signihcanl
cosl. Il viII increase comelilion in lhe markel and inveslors vouId gel beuer services.
MuIliIe-IeveI KYC formaIilies viII nol be needed, cIienl viII have a singIe-oinl for regislralion as veII as
udales inslead of going lo dierenl inlermediaries for lhis urose.
The move is execled lo reduce lhe overhead cosls for inlermediary lhal have lo mainlain back-oce sla for
carrying out KYC requirements.
WhiIe lhe iniliaI KYC vouId be cenlraIized by KRA, lhe inlermediaries viII conlinue lo be resonsibIe for lhe
enhanced due diligence of their clients.
To imIemenl lhe KRA ReguIalions eecliveIy, SII had vide circuIar daled December 23, 2011 issued cerlain
guideIines for inlermediaries and KRAs. KRA syslem vas iniliaIIy inlroduced onIy for lhe nev cIienls vilh eecl
from January 1, 2012. Subsequently, SEBI implemented the system for the KYCs of the existing clients also by
issuing guidelines vide circular dated April 13, 2012. The time lines were given to the intermediaries to upload the
KYCs of the existing clients in the KRA system in a phased manner.
SII ReguIalions ermil muIliIe KRAs vilh a viev lo encourage comelilion and rovide beuer services lo lhe
inveslors. Al resenl, hve KRAs are regislered vilh SII viz. CDSL Venlures Limiled
(CVL), NSDL Database Management Limited, DotEx International Limited (DotEx), CAMS Investor Services Private
Limited and Karvy Data Management Services Ltd. KYCs of approximately 1.6 crore investors have been uploaded
/ registered on the KRA system. The focus is to provide faster access to the data to all the intermediaries and
easy sharing of information between the KRAs. The same has been achieved through inter-operability among the
systems of KRAs. The inter-operability provides an online medium of exchange of client records between the KRAs.
20
d. Facilitating Electronic Uploading of
KYC Documents
The Regulations prescribe that the
KYC Registration Agencies (KRAs) shall
require the intermediary to send original
KYC documents of the clients to the KRAs.
Considering the issues faced in furnishing
original KYC documents to the KRA viz. cost
of retrieval, logistics involved, loss in transit,
etc., the KRA Regulations were amended for
doing away with the requirement for sending
original KYC documents of the clients to the
KRAs. Instead, the intermediaries would
upload documents electronically on the
systems of KRAs with proper authentication.
C. St r engt heni ng KYC Nor ms -
Idcnticatinn nI Bcnccia! Owncrship
SEBI has been taking steps to prevent
money laundering and terrorist financing
through the securities markets. With a view to
further strengthen the existing framework and
to tackle the risk presented by the misuse of
complex legal structures, such as, companies,
partnerships, trusts etc., in facilitating money
Iaundering or hnancing of lerrorism, SII
has made it mandatory for its intermediaries
lo idenlify lhe benehciaI ovner (O) and
to take all reasonable steps to verify the
identity of such BOs for clients who are legal
persons/arrangements. SEBI vide circular
dated January 24, 2013 issued guidelines to
inlermediaries for delerminalion of benehciaI
ownership. These guidelines are in line with
the revised Financial Action Task Force (FATF)
standards released in February 2012.
D. Mndicatinn/ Changc nI Namc in thc
Bcnccia! Owncr (BO) Accnunt
In order to simplify the procedure of
change of name in individual Beneficial
Owners (BO) account, the depositories
were directed that an individual BO may be
allowed to change his / her name subject to
the submission of following documents at the
time of change of name of the individual in
lhe O accounl:
Change in name Document to be
nn accnunt nI - submiucd
Marriage Marriage Cerlihcale or coy
of Passport showing
husbands name or
publication of name change
in ociaI gazeue.
Reasons other than Publication of name change
marriage in ociaI gazeue.
Change in fathers Publication of name change
name in ociaI gazeue.
E. Prevention of Unauthorised Trading
SEBI had earlier mandated that the
stock exchanges shall send details of the
transactions in cash and derivative segments
to the investors, by the end of trading day,
through SMS and E-mail alerts. This was
introduced with an objective to prevent the
complaints by investors of unauthorized
trading in their accounts by the stock brokers.
As the progress of registration of clients with
lhe slock exchange for geuing such aIerls
vas very sIov, cerlain modihcalions vere
made in the scheme in consultation with the
stock exchanges. As a result, the number of
trade alerts sent through SMS/emails by stock
exchanges has increased manifold.
F. Reduction of Time-line for Transfer
of Equity Shares and Prescription
of Time-line for Transfer of Debt
Securities
The listing agreement for equity shares
prescribed under the Securities Contracts
(ReguIalion) Acl, 1956 inler aIia secihed a
period of one month for registering transfer
of shares from the date of lodgment. With
a view to expedite the transfer process in
the interest of the investors, the time-line
21
for registering the transfer of shares was
reduced to 15 days vide SEBI circular dated
July 05, 2012, in consultation with Registrars
Association of India (RAIN), stock exchanges
and market participants. The same time-line
has also been made applicable for transfer of
debt securities. This circular came into force
vilh eecl from Oclober 01, 2012.
G. Enhanced Level of Compliance by the
Intermediaries
In order to strengthen the monitoring
mechanism through periodic reporting by
intermediaries, a revised reporting format
was prescribed by SEBI for Bankers to the
Issue (by circular dated March 29, 2012),
Merchant Bankers (vide circular dated May
14, 2012) and Registrar to an Issue and Share
Transfer Agent (vide circular dated July 05,
2012). Such format was earlier prescribed for
debenture trustees. The revised formats along
with directives issued to these intermediaries
specify the accountability of their boards
in respect of (a) review of compliance of all
regulatory requirements on half-yearly basis
(b) review of the status of redressal of investor
complaints (c) corrective measures initiated to
avoid dehciencies/vioIalions in fulure.
As this step taken by SEBI requires
placing of reports before the boards for
their review before sending to SEBI along
with their comments, this would enhance
accounlabiIily al dierenl IeveIs vilhin lhe
organisation of the intermediary and as a
result would improve regulatory compliance
and ensure roer auenlion lo comIainls of
investors.
H. Policy of Inspection of Stock Brokers
by St oc k Exc hanges / Cl ear i ng
Corporations
SEBI took a number of steps during
the year 2012-13 to improve the inspection
systems of the stock exchanges / clearing
cororalions, as er delaiIs given beIov:
a. The stock exchanges and the Clearing
Corporations are required to inspect
thei r acti ve members i n vari ous
segments every year. SEBI has reviewed
the policy of inspection with a view
to enhance focus on risk related issues
and adopt risk based approach to such
inspections. SEBI, vide circular dated
December 07, 2012, has advised Stock
Exchanges and Clearing Corporations
that their policy for annual inspection of
their members in various segments, shall
also cover various kinds of risks posed
to the investors and market at large
on account of the activities/business
conduct of their members. The revised
policy would ensure that the members
who pose higher risks to the system
are adequately supervised by the Stock
Exchanges.
b. In order lo imrove lhe eecliveness
of supervision of members, SEBI, vide
circular dated December 07, 2012,
also advised the stock exchanges
to establish an information sharing
mechanism among themselves, to
share the important outcomes/adverse
observations of their inspections
of members who hol d mul t i pl e
membership with the stock exchanges.
c. Stock exchanges are empowered under
their Byelaws to impose monetary
penalties on their stock brokers for
violations/non-compliances based
on findings of their inspections and
regular monitoring. SEBI reviewed the
penalty structure in consultation with
stock exchanges. The stock exchanges
have framed the revised penalty
structure which is more deterrent in
22
commensurate with the seriousness of
violations and repetitions of violations.
The revi sed penal ty structure i s
proposed to be implemented in the
Financial Year 2013-14.
I. Requirement of Base Minimum Capital
for Stock Broker and Trading Member
The Base Minimum Capital (BMC)
deposit requirement for Stock Broker and
Trading Member (BMC) has been prescribed
to be commensurate with the risks, other
than market risk, that the broker may bring
to the system. BMC is the deposit given by
the member of the exchange against which no
exposure for trades is allowed.
Over the years the market structure has
undergone significant structural changes.
The various technological changes and the
increased speeds of trading have brought
to fore the greater quantum of risks arising
during the course of execution of transactions.
In light of this, based on deliberations at
various forums, SEBI has realigned the BMC
requiremenls vilh lhe risk rohIes of lhe
stock brokers / trading members in cash /
derivative segment of the stock exchange.
In terms of the said circular, the Base
Minimum Capital (BMC) deposit shall be
introduced for members holding registration
as trading member in any derivative
segment and shall be enhanced for members
holding registration as stock-broker in cash
segment. Stock brokers / trading members
shall maintain the prescribed BMC based
on lheir rohIes viz: (1) OnIy Irorielary
trading without Algorithmic trading (Algo)
(2)Trading only on behalf of Client (without
proprietary trading) and without Algo. (3)
Proprietary trading and trading on behalf of
Client without Algo.(4) All Trading Members/
Brokers with Algo.
J. Enhancing the Competency Level
of the Employees of the Market
Intermediaries
Conlinuing lhe eorls lo imrove lhe
competency levels of the employees of the
market intermediaries and with a view
to improve the quality of intermediation
services in the securities market, SEBI
mandated the requirement of obtaining the
foIIoving cerlihcalions by lhe emIoyees of
lhe inlermediaries:
a. Equi t y Deri vat i ve Cert i fi cat i on
Examination (EDCE) for associated
persons functioning as approved users
and sales personnel of the trading
members of an equity derivative
exchange or equity derivative segment
of a recognized stock exchange.
b. Securities Intermediaries Compliance
(Nnn-Fund) Ccrticatinn Examinatinn
(SICCE) for associated persons
functioning as compliance officers of
intermediaries registered with the Board
as stock brokers, depository participants,
merchant bankers, underwriters, bankers
to the Issue, or debenture trustees or
credit rating agencies.
K. Sharing of Information Regarding
Issuer Companies between Debenture
Trustees and Credit Rating Agencies
Debenture Trustees (DTs) and Credit
Rating Agencies (CRAs) collect and have
access to information about the issuer
companies in their respective capacity.
Signihcanl obIigalions have been casl under
SEBI Regulations on both of these groups
of intermediaries to protect the interests of
debenture holders. It was felt that there is
a need for these two intermediaries to have
beuer coordinalion among lhemseIves for
sharing of informalion lo ensure eeclive
23
discharge of duties by them by taking action
on timely basis.
SEBI issued guidelines for sharing of the
following information among the DTs and
CRAs:
a. Irom CRAs lo DTs: Ralings assigned
and rationale, non cooperation by issuer
on sharing information for monitoring
credil quaIily, any defauIl commiued by
issuer,
b. Irom DTs lo CRAs: encumbrances, if
any, on the asset in respect of which
security has been created, adequacy
of asset cover, any defaults in interest/
redemption payments, delay in creation
of security, restructuring of terms
of issue, grievances in respect of the
debentures issued, and non cooperation
in furnishing information to DT etc.
c. Any other information as required.
L. Mini Derivative (Futures & Options)
Contract on Index (Sensex & Nifty)
With a view to ensure that small/retail
inveslors are nol auracled lovards derivalives
segment, SEBI discontinued mini derivative
contracts (having contract size of ` 1 lakh)
on Index (Sensex and Nifty). The existing
unexired conlracls vere ermiued lo lrade
till expiry and new strikes could also be
introduced in the existing contract months.
Accordingly, the last expiry available on mini
derivative (Futures & Options) contract on
Index (Sensex & Nifty) was in January 2013.
M. Revision of Eligibility Criteria for
Stocks in Derivatives Segment
In order to improve market integrity, in
consultation with stock exchanges, tightened
the eligibility and exit criteria for stocks
in derivatives segment. Accordingly, the
minimum Median Quarter Sigma Order
Size (MQSOS) requirement for a stock to
be eligible for introduction in derivatives
segment has been revised from ` 5 lakh
to ` 10 lakh. The minimum Market wide
position limit (MWPL) requirement for a stock
to be eligible for introduction in derivatives
segment has been revised from ` 100 crore
to ` 300 crore. Further, minimum MWPL
requirement for a stock to be retained in
derivatives segment has been revised from
` 60 crore to ` 200 crore. The minimum
MQSOS requirement for a stock to be retained
in derivatives segment has been revised from
` 2 lakh to ` 5 lakh.
An additional criterion of stock
derivatives to have average monthly turnover
in derivatives segment for last three months
of ` 100 crore has also been decided to be
implemented for a stock to be retained in
derivatives segment.
N. Revised Position Limits for Trading
Member (Banks) in Exchange Traded
USD:INR Derivative Contracts
SEBI Circular dated July 30, 2010, inter
alia, provides for position limits applicable for
USD:INR derivalives conlracls sliuIaling lhe
norms applicable to Trading Member (Banks).
In Iighl of lhe RI CircuIar No:
RBI/2011-12/569 dated May 21, 2012 on
Risk Management and Inter-bank dealings
which revised norms on position limits
for Authorized Dealers Category I (AD
Calegory I) banks, SII modihed Annexure
II, para-3 of page 5 of the above stated SEBI
Circular dated Jul 30, 2010, as Gross open
positions of the bank across all contracts (both
futures and options contracts) not to exceed
15 percent of the total open interest or USD
100 million whichever is lower.
24
O. Corporate Bonds and Government
Securities as Collateral
The Honble Finance Minister, in his
announcement in the Union Budget for
the year 2013 -14, has proposed, inter-
alia, to permit FIIs to use their investment
in corporate bonds and Government
securities as collateral to meet their margin
requirements towards their transactions on
the recognized stock exchanges in India.
Reserve Bank of India vide Circular
No. 90 daled March 14, 2013 has ermiued
IIIs lo use, in addilion lo aIready ermiued
collaterals, their investments in corporate
bonds as collateral in the cash segment and
government securities and corporate bonds as
collaterals in the F & O segment.
In Iighl of lhe above, SII has ermiued
FIIs to offer the following collaterals -
government securities, corporate bonds, cash
and foreign sovereign securities with AAA
ratings, for their transactions in both cash and
F&O segments. In this regard, the stipulations
secihed by SII and RI vilh regard lo
the acceptance of various collaterals shall be
adhered to.
P. Comprehensive Guidelines on Offer
For Sale (OFS) of Shares by Promoters
through the Stock Exchange Mechanism
In order to achieve minimum public
shareholding in listed companies and to
allow promoters to dilute their shareholding
in transparent manner ensuring wider
arlicialion, Oer for SaIe (OIS) lhrough
stock exchange mechanism was introduced
on February 01, 2012.
Subsequently, based on the experience
and feedback recei ved from market
participants, the OFS framework was
reviewed and revised guidelines were issued
on July 18, 2012. The following major changes
vere inlroduced vilh lhe revised guideIines:
a. The 12 veeks cooI-o eriod for lhe
promoter(s)/promoter group entities
with respect to the purchase / sell shares
of the company was relaxed such that,
within the cooling off period of 12
veeks, lhe romolers vere ermiued
lo oer lheir shares onIy lhrough OIS
/ Institutional Placement Programme
(IPP) with a gap of 2 weeks between
successive oers.
b. The size of offer was allowed to be
less than ` 25 crore so as to achieve
minimum public shareholding in a single
tranche.
c. An option was given to the issuer to
usize lhe oer sub|ecl lo aroriale
disclosure in the notice and advance
pay-in of shares.
d. Modihcalion / canceIIalion of orders/
bids were allowed during the last 60
minules of lhe duralion of lhe oer for
sale as against the earlier provision of
last 30 minutes.
e. The stock exchanges were advised to
disclose indicative price only during the
last 60 minutes of the duration of the
OFS.
f. Option was given to institutional
investors to place bids/orders with either
100 percent margin or 25 percent margin.
g. It was advised that the dissemination
of oor rice vouId nol be a arl of lhe
notice as against the earlier provision.
If lhe seIIer inlends lo discIose lhe oor
price, the price may be disclosed after
the close of business hours on (T-1) day.
h. Additional half an hour time was
provided to custodian during post close
25
lrading hours lo conhrm lhe inslilulionaI
bids, subject to the condition that the
bids and payments have been received
before closure of the bidding process.
Further, in order to align OFS with
secondary market trades, the guidelines were
further revised on January 25, 2013 and the
foIIoving changes vere incororaled:
a. The eligible seller may be all promoters/
promoter group entities of top 100
companies by market capitalisation in
any of the last four completed quarters
as against last completed quarter as per
earlier provisions.
b. The foIIoving orders are ermiued in
OFS-
i. Orders with 100 percent of margin
paid upfront by institutional
investors and non-institutional
investors. Such orders can be
modihed or canceIIed al any lime
during the trading hours.
ii. Orders without paying upfront
margin by institutional investors
only. Such orders cannot be
modified or cancelled by the
investors or stock brokers, except
for making upward revision in the
price or quantity.
c. Cumulative bid quantity is made
avai l abl e onl i ne t o t he market
lhroughoul lhe lrading session al secihc
intervals in respect of orders with 100
percent upfront margin and separately
in respect of orders placed without any
upfront margin. Indicative price shall
be disclosed to market throughout the
trading session. The indicative price is
calculated based on all valid bids/orders.
d. Clearing Corporation collects 100 percent
margin in cash from non-institutional
investors. In case of institutional
investors who place orders/bids with
100 percent of margin upfront, custodian
confirmation shall be within trading
hours. In case of institutional investors
who place orders without upfront
margin, cuslodian conhrmalion is as er
the existing rules for secondary market
transactions.
e. SeuIemenl shaII lake Iace on lrade for
trade basis. For non-institutional orders/
bids and for institutional orders with 100
ercenl margin, seuIemenl lakes Iace
on T+1 day. In case of orders/bids of
institutional investors with no margin,
seuIemenl is as er lhe exisling ruIes for
secondary market.
Q. Act i vat i on of ISIN i n Case of
Additional Issue of Shares / Securities
In order t o curt ai l t he t ransfer
of additional issue of shares / securities
incIuding by vay of furlher ubIic oerings,
rights issue, preferential allotment and bonus
issue, etc., of the listed company, prior to
receipt of final listing/ trading approval,
the Depositories were advised to allot such
additional shares/securities under a new
temporary ISIN which would be kept frozen.
It was further advised that, upon receipt
of lhe hnaI Iisling/ lrading ermission from
the exchange for such additional shares /
securities, the shares / securities credited in
the new temporary ISIN shall be debited
and the same would get credited in the pre-
existing ISIN for the said security. Thereafter,
the additional securities shall be available for
trading. Further, in case of issuance of equity
shares by a company listed on multiple stock
exchanges, the concerned stock exchanges
shall synchronize their effective dates of
listing / trading approvals.
26
R. C!aricatinn nn Dircct Markct Acccss
(DMA)
The framevork of DMA vas modihed lo
the following extent in light of the feedback
received from the market participants and
measures prescribed by SEBI to simplify
and rationalize Trading Account Opening
Irocess:
a. The facility of DMA provided by
the stock broker shall be used by the
client or an investment manager of the
client. A SEBI registered entity shall
be ermiued lo acl as an inveslmenl
manager on behalf of institutional
clients. In case the facility of DMA is
used by the client through an investment
manager, the investment manager may
execute the necessary documents on
behalf of the client(s).
b. In order to bring uniformity on the
requirement of documentation for
trading account opening process, the
secihc roker CIienl Agreemenl for
the purpose of DMA shall be replaced
with the Terms and Condition that
shall be provided to the client or
investment manager acting on behalf of
a client(s) for availing the DMA facility.
c. Exchange shall specify from time to time
the categories of investors to whom the
DMA facility can be extended. Currently,
this facility is available for institutional
clients. Brokers shall specifically
authorize clients or investment managers
acting on behalf of clients for providing
DMA faciIily, afler fuIhIIing Knov Your
Client requirements and carrying out
necessary due diligence. The broker shall
maintain proper records of such due
diligence.
S. Facility for a Basic Services Demat
Account (BSDA)
Wi t h a vi ew t o achi eve wi der
financial inclusion, encourage holding of
demat accounts and to reduce the cost of
maintaining securities in demat accounts
for retail individual investors, all depository
participants (DPs) were advised to provide a
Basic Services Demat Account (BSDA) with
limited services. The salient features of the
SDA are as foIIovs:
a. IIigibiIily Crileria: AII lhe individuaIs
who have or propose to have only
one demat account where they are the
soIe or hrsl hoIder shaII be eIigibIe lo
have a BSDA provided that the value
of securities held in the demat account
does not exceed Rupees two lakh at any
point of time. An individual can have
only one BSDA in his/her name across
all depositories.
b. Charges / Annual Maintenance Charges
(AMC)
i. Upto ` 50,000 there will be NIL
Annual Mai ntenance Charge
(AMC), and,
ii. for value of holding from ` 50,001
to ` 2,00,000 AMC will be upto
` 100.
The value of holding shall be determined
by the DPs on the basis of the daily closing
price or NAV of the securities or units of
mutual funds. If the value of holding in such
BSDA exceeds the prescribed criteria at any
date, the DPs may levy charges as applicable
to regular accounts (non-BSDA) from that
date onwards.
Further, in order to reduce the cost of
compliance of DPs, following rationalisation
measures vere decided for reguIar accounls:
27
a. Accounts with zero balance and nil
lransaclions during lhe year: The DIs
shall send one physical statement of
holding annually to such BOs and
shall resume sending the transaction
statement as and when there is a
transaction in the account.
b. Accounts which become zero balance
during lhe year: Ior such accounls, no
transaction statement may be sent for
the duration when the balance remains
nil. However, an annual statement of
holding shall be sent to the BO.
c. Accounls vilh credil baIance: Ior
accounts with credit balance but no
transactions during the year, one
statement of holding for the year shall
be sent to the BO.
T. Review of Margining with Respect to
Exchange Traded Funds (ETFs)
In order lo bring eciency in margining
of index ETFs that track broad based market
indices, it was decided that VaR margin
computation for such ETFs shall be computed
as higher of 5 percent or three times sigma of
lhe ITI. Iurlher, in order lo faciIilale ecienl
use of margin capital by market participants,
it was decided to extend cross margining
facility to ETFs based on equity index and
ils consliluenl slocks for foIIoving o-seuing
osilions in cash markel segmenl:
a. ETFs and constituent stocks (in the
roorlion secihed for lhe ITI) lo lhe
exlenl lhey osel each olher,
b. ETFs and constituent stock futures (in
lhe roorlion secihed for lhe ITI) lo
lhe exlenl lhey osel each olher, and,
c. ETFs and relevant Index Futures to the
exlenl lhey osel each olher.
U. Review of the Securities Lending and
Borrowing (SLB) Framework
Securities Lending and Borrowing (SLB)
Iramevork vas modihed lo ermil roIIover
facility for any lender or borrower who
wishes to extend an existing lent or borrow
position. Further, Liquid Index Exchange
Traded Iunds (ITIs) vere aIso ermiued
under SLB.
V. Rajiv Gandhi Equity Savings Scheme,
2012
Rajiv Gandhi Equity Savings Scheme,
a lax saving scheme, vas nolihed by lhe
Governmenl lo encourage ov of savings in
hnanciaI inslrumenls and imrove lhe delh
of domestic capital market by bringing in new
investors. SEBI, in this regard, directed stock
exchanges, depositories and mutual funds to
implement the scheme.
W. Timc Pcrind Inr Initia! Ocring and
Allotment of Units of Mutual Fund
Scheme Eligible under Rajiv Gandhi
Equity Savings Scheme, 2012 (RGESS)
For mutual fund schemes eligible under
RGESS, the maximum period for which initial
oering of shaII be oen for subscrilion,
was extended from the existing stipulation
of hfleen days lo lhirly days, and lhe eriod
within which Mutual fund/ AMC should
allocate the units, refund money and issue
statements of accounts, was extended from
lhe exisling requiremenl of hve vorking days
from the closure of the initial subscription
lo hfleen days from lhe cIosure of lhe iniliaI
subscription.
X. Guidelines for providing Dedicated
Debt Segment on Stock Exchanges
With an objective to develop corporate
bond markets and encourage trading on
stock exchange trading platform, it was
28
decided that the stock exchanges may create
a separate debt segment to provide for
trading, reporting, membership, clearing and
seuIemenl ruIes, risk managemenl framevork
and other necessary provisions. (Box 1.4 may
be referred for details)
Box 1.4 : Dedicated Debt segment on stock exchanges
With an objective to develop corporate bond markets and encourage trading on stock exchange trading platform,
it was decided that the stock exchanges may create a separate debt segment to provide for trading, clearing,
seuIemenl, reorling faciIilies and membershi lo deaI in lhe foIIoving:
a. Debl securilies as dehned in Securilies and Ixchange oard of India (Issue and Lisling of Debl Securilies)
ReguIalions, 2008,
b. Government Securities, Treasury Bills, State Government loans, SLR and Non-SLR Bonds issued by Financial
Institutions, municipal bonds, single bond repos, basket repos and CBLO kind of products subject to RBI
arovaI, vhere required,
c. Securilized debl inslrumenls as dehned in SII (IubIic Oer and Lisling of Securilised Debl Inslrumenls)
ReguIalions, 2008,
d. any olher debl inslrumenls as may be secihed from lime lo lime by lhe comelenl aulhorily
The saIienl fealures / framevork of lhe segmenl are as under:
(i) Trading:
a. The debl segmenl shaII oer eIeclronic, screen based lrading roviding for order malching, requesl for
quote, negotiated trades etc.
b. The debt segment shall provide separate platforms for the markets described below -
i. Retail market - which shall be a market for listing of and trading in publicly-issued debt instruments
and where participation by registered trading members can be on their own account or for execution
of orders placed their clients.
ii. Institutional market - which shall be a market for non-publicly-issued debt instruments with a market
lot size of minimum ` 1 crore.
(ii) Trading RuIes:
a. The lrading hours shaII be from 9:00 hours lo 17:00 hours lo be in aIignmenl vilh lrading hours of
government securities as issued by RBI.
b. The day count convention of Actual/Actual shall be followed for calculating interest rates.
c. The stock exchange shall facilitate availability of price quotes on clean price, dirty price and yield.
d. There shall be no shut period during which trades/ transfers are restricted for payment of interest or part
redemptions. For other corporate actions such as redemptions / put-call options, issuers may choose to
specify a shut period.
e. The record dale shaII be hxed nol more lhan 15 days rior lo dale of cororale aclion vhich shaII be
displayed on trading terminal by stock exchanges.
f. In case of negotiated trades by members of the debt segment, the trades shall be reported to stock
exchange within 30 minutes of the trade.
(iii) CIearing and SeuIemenl:
a. AII lrades shaII be cIeared and seuIed lhrough a cIearing cororalion. Ior lhis urose, aII lrading
members shall be self clearing members or may clear through a clearing member.
b. The seuIemenl shaII deend on lhe markel lye, as given beIov:
i. Ior inslilulionaI markel: AII lrades shaII be seuIed on T+1 roIIing seuIemenl on DVI-I basis using RI
RTGS accounl. Slock exchanges/cIearing cororalion may ol lo rovide cIearing and seuIemenl on
29
Y. Pre-Trade Risk Controls
In view of the need to put-in place
additional risk control measures to mitigate
disruption of trading at the exchanges on
account of erroneous orders, stock exchanges
were directed to implement various pre-trade
risk controls such as order-level check(s),
dynamic price bands and risk reduction
mode. (Box 1.5 mu be referred for detulIs)
Z. Liquidity Enhancement Schemes for
Illiquid Securities in Equity Cash
market
In view of the demand from the market
participants for a scheme similar to the
Liquidity Enhancement Schemes (LES) in
derivatives segment to enhance liquidity of
illiquid securities in their Equity Cash market,
slock exchanges vere ermiued lo inlroduce
LIS in any of lhe foIIoving securilies:
a. Securities having a mean impact cost
greater than or equal to 2 percent for
an order size of ` 1 lakh, where mean
impact cost of the security on the stock
exchange is calculated over the past 60
trading days.
b. Securities introduced for trading in the
ermiued lo lrade calegory.
Further, stock exchanges were also
directed that LES may be continued till such
time as the security achieves mean impact
cost of less than 2 percent for an order size of
` 1 lakh on the stock exchange during the last
60 trading days.
Box 1.4 : Dedicated Debt segment on stock exchanges (contd.)
DVP-II or DVP-III basis for this market in future and shall put in place appropriate risk management
framework for the same.
ii. Ior relaiI markel: The lrades shaII be seuIed on T+2 roIIing seuIemenl on DVI-III basis vilh seuIemenl
guarantee.
(iv) Risk managemenl framevork:
a. For retail market, a uniform margin rate of 10% shall be applicable on debt instruments with rating of AA
or above (or with similar rating nomenclature) by recognised credit rating agencies and 25% for all other
debt instruments. Further, in case of shortages, there shall be compulsory close-out with a markup of 5%
in case of debt instruments which are assigned a credit rating of AA and above and 10% in case of other
debt instruments.
b. Ior inslilulionaI markel, as and vhen seuIemenl is done on DVI-II or DVI-III basis, aroriale margins
may be prescribed after approval by SEBI.
c. The clearing corporation shall specify appropriate risk management framework for each market, wherein it
shall, inter-alia, provide for computation and collection of margins, capital adequacy norms and collateral
requiremenls for lhe cIearing members, seuIemenl guaranlee fund as aIicabIe.
Further, in order to enable direct membership of institutional participants, SEBI Board inter-alia approved the
following amendments in SEBI (Stock-Brokers and Sub-Brokers) Regulations, 1992 to-
a. IncIude debl segmenl in addilion lo derivalives segmenl and currency derivalives segmenl in lhe dehnilion of
cIearing members, seIf cIearing members, lrading members,
b. Inlroduce dehnilion of rorielary lrading member lo ermil secihed inslilulions such as scheduIed
commercial banks, primary dealers, pension funds, provident funds, insurance companies, mutual funds and
any olher inveslors as may be secihed by secloraI reguIalors from lime lo lime.
30
Box 1.5 : Pre-trade Risk Controls
In view of the need to put-in place additional risk control measures to mitigate the risk of disruption in trading at
the exchanges on account of erroneous orders, it was decided that stock exchanges shall implement the following
measures:
i. Order-IeveI checks: Minimum pre-trade risk controls for all categories of orders placed on Stocks, Exchange
Traded Iunds (ITIs), Index Iulures and Slock fulures:
a. VaIue/Quanlily Limil er order:
i. Any order with value exceeding ` 10 crore per order shall not be accepted by the stock exchange for
execution in the normal market.
ii. In addition, stock exchange shall ensure that appropriate checks for value and / or quantity are
imIemenled by lhe slock brokers based on lhe reseclive risk rohIe of lheir cIienls.
iii. Stock exchange to ensure that stock brokers put-in place a mechanism to limit the cumulative value of
all unexecuted orders placed from their terminals to below a threshold limit set by the stock brokers.
b. Stock exchanges shall enhance monitoring of the operating controls of the stock brokers to ensure
imIemenlalion of lhe checks menlioned above, and Ievy delerrenl enaIly in case any faiIure is observed
at the end of stockbroker in implementing such checks.
ii. Dynamic Price Bands (earlier called Dummy Filters or Operating Range)
a. It was decided to tighten the initial price threshold of the dynamic price bands such that stock exchange
shaII sel lhe dynamic rice bands al 10% of lhe revious cIosing rice for lhe foIIoving securilies:
i. Stocks on which derivatives products are available,
ii. Stocks included in indices on which derivatives products are available,
iii. Index futures,
iv. Stock futures.
b. Further, in the event of a market trend in either direction, the dynamic price bands shall be relaxed by the
stock exchanges in increments of 5%. Stock exchanges shall frame suitable rules with mutual consultation
for such relaxation of dynamic price bands.
iii. Risk Reduction Mode
a. Stock brokers to be mandatorily put in risk-reduction mode when 90% of the stock brokers collateral
available for adjustment against margins gets utilized on account of trades that fall under a margin system.
Such risk reduclion mode shaII incIude lhe foIIoving:
i. All unexecuted orders shall be cancelled once stock broker breaches 90% collateral utilization level.
ii. OnIy orders vilh Immediale or CanceI auribule shaII be ermiued in lhis mode.
iii. AII nev orders shaII be checked for suciency of margins.
iv. Non-margined orders shall not be accepted from the stock broker in risk reduction mode.
b. The stock broker shall be moved back to the normal risk management mode as and when the collateral
of the stock broker is lower than 90% utilization level.
ZA. Introduction of Periodic Call Auction
for Illiquid Scrips and Extension of Pre-
Open Session to all Scrips
SEBI in consultation with Secondary
Markel Advisory Commiuee (SMAC) decided
to introduce trading in illiquid shares
through periodic call auction. Accordingly,
the guideline for trading in illiquid scrips
was issued on February 14, 2013 and stock
exchanges were advised to implement the
31
same from April 01, 2013. Around 2000 scrips
at BSE and around 260 scrips at NSE would
faII under lhe dehnilion of iIIiquid scris and
would not be available for trading under
continuous market. Further, the framework
of Pre-open call auction session was extended
from the scrips forming part of Nifty and
Sensex lo aII Iiquid scris vilh eecl from
April 01, 2013. (Box 1.6 may be referred for
details)
Box 1.6 : Periodic Call Auction for Illiquid scrips and Extension of
Pre-Open Call Auction Session
SEBI introduced Call Auction in Pre-open session for scrips forming part of Nifty and Sensex on July 15, 2010 on
pilot basis at NSE and BSE. Further the framework was subsequently extended to IPO scrips and re-listed scrips
on January 20, 2012. Based on the experience & in consultation with SMAC, it was decided to introduce trading in
illiquid scrips through periodic call auction. Accordingly, the guidelines for trading in illiquid scrips were issued
on February 14, 2013 which was implemented from April 08, 2013. Following are the key features of periodic call
auclion framevork:
1. Trading in illiquid scrips in the equity market shall be conducted only through periodic call auction sessions.
2. Crileria for iIIiquidily A scri, vhelher lrading in normaI markel or lrade for lrade seuIemenl, shaII be
cIassihed as iIIiquid on a slock exchange if aII lhe foIIoving condilions are mel:
a. The average daiIy lrading voIume of a scri in a quarler is Iess lhan 10000,
b. The average daiIy number of lrades is Iess lhan 50 in a quarler,
c. The scri is cIassihed as iIIiquid al aII exchanges vhere il is lraded.
3. Entry into periodic call auction mechanism Stock exchanges shall identify illiquid scrips at the beginning of
every quarter and move such scrips to periodic call auction mechanism.
4. Exit from periodic call auction mechanism Stock exchanges shall move scrips from periodic call auction
mechanism lo normaI lrading session if lhe foIIoving crileria are mel:
a. The scrip has remained in periodic call auction for at least two quarters
b. Il is nol cIassihed as iIIiquid as er ara (ii)
5. Notice to market For entry and exit of scrips in the call auction mechanism, a notice of two trading days shall
be given to the market.
6. Number of auction sessions Periodic call auction sessions of one hour each shall be conducted throughout
lhe lrading hours vilh lhe hrsl session slarling al 9:30am.
7. Session duration - The call auction session duration shall be one hour, of which 45 minutes shall be allowed
for order enlry, order modihcalion and order canceIIalion, 8 minules shaII be for order malching and lrade
conhrmalion and remaining 7 minules shaII be a buer eriod for cIosing lhe currenl session and faciIilaling
the transition to next session. The session shall close randomly during last one minute of order entry between
the 44th & 45th minute. Such random closure shall be system driven.
8. Un-matched orders- All un-matched orders remaining at the end of a call auction session shall be purged.
9. Price band A maximum price band of 20% shall be applicable on the scrips through the day. Exchanges may
reduce the price bands uniformly based on surveillance related concerns.
10. If the Market wide Index Circuit Breaker gets triggered at any time during the periodic call auction session,
the session shall be cancelled and all orders shall be purged. The periodic call auction session shall be resumed
at the nearest half hour after the normal market resumes.
32
ZB. Usage of Electronic Payment Modes for
making Cash Payments to the Investors
In viev of advancemenls in lhe heId
of electronic payment systems in the last
decade, it was decided that companies whose
securities are listed on the stock exchanges
shall use, either directly or through their
RTI & STA, any Reserve Bank of India (RBI)
approved electronic mode of payment such
as ECS [LECS (Local ECS) / RECS (Regional
ECS) / NECS (National ECS)], NEFT, etc for
making cash payments to the investors.
In order to ensure this, companies
were directed to maintain requisite bank
details of their investors - either directly
for the investors that hold physical shares
/ debentures certificates or by seeking
relevant bank details from the depositories
for investors that hold shares / debentures in
demat mode.
ZC. Activitics nI Advisnry Cnmmiuccs
a. 5ccnndary Markct Advisnry Cnmmiucc
(SMAC)
SMAC recommends measures, for
changes and improvements in the market
structure, for improving market safety,
efficiency, transparency and integrity,
and for reducing transaction costs. SMAC
vas consuIled on various mauers such as
facility for a Basic Services Demat Account,
margining with respect to ETFs, rollover
facility in SLB, periodic call auction for
illiquid scrips, extension of pre-open session
to all scrips, etc. Some of the policy decisions
taken in 2012-13 based on the SMAC
recommendalions vere:
i. Exit Policy for De-recognized / Non-
operational Stock Exchanges.
ii. Review of Margining with respect to
Ixchange Traded Iunds (ITIs):
Box 1.6 : Periodic Call Auction for Illiquid scrips and Extension of
Pre-Open Call Auction Session (contd.)
11. Penalty for certain trades - In the event where maximum of buy price entered by a client (on PAN basis) is
equal to or higher than the minimum sell price entered by that client and if the same results into trades, a
penalty shall be imposed on such trades. The penalty shall be calculated and charged by the exchange and
collected from trading members on a daily basis. Trading members may recover such penalty from clients. The
penalty so collected shall be deposited to Investor Protection Fund. Penalty for each such instance per session
viII be higher of lhe foIIoving:
a. 0.50% of the trade value for sale and 0.50% of trade value for the buy, resulting in 1% penalty for the client
on PAN basis.
OR
b. 2500/- for the buy trade and 2500/- for the sell trade, resulting in penalty of 5000/- for the client on PAN
Basis.
12. In addition to this, SEBI in consultation with SMAC decided to extend the call auction mechanism in pre-open
session from scrips forming part of SENSEX and NIFTY to all liquid scrips. Accordingly guidelines issued on
}uIy 15, 2010 for CaII Auclion framevork vere arliaIIy modihed as under:
a. Pre-open call auction session shall be applicable to all exchanges with active trading and for all scrips that
are nol cIassihed as iIIiquid as er ara (ii) above.
b. Price bands in pre-open session shall be as applicable in the normal market.
c. AII orders shaII be checked for margin suciency al order IeveI for incIusion in re-oen session.
33
Comulalion of VaR margin for ITIs
that track broad based market index
as higher of 5% or three times sigma
of the ETF.
Inlroduclion of Cross-Margining
facility in respect of offsetting
positions in ETFs based on equity
indices and constituent stocks, stocks
futures and relevant index futures.
iii. Review of the Securities Lending and
orroving (SL) Iramevork:
Inlroduclion of roII-over faciIily.
I nl roducl i on of I i qui d I ndex
Exchange Traded Funds (ETFs)
under the SLB scheme.
iv. Introduction of trading through periodic
call auction for illiquid scrips in equity
market.
v. Extension of the pre-open session to all
liquid scrips in the equity market
b. Tcchnica! Advisnry Cnmmiucc (TAC)
Technological advancements have
brought to the fore several challenges
associated with the use and adoption
of technology in the securities market.
TAC, comprising of technological experts,
vas consuIled on mauers reIaled lo such
challenges so as to keep pace with such
technological advancements and frame
appropriate policies thereof. Some of the
policy decisions taken in 2012-13 based on the
TAC recommendalions vere:
i. Guidelines for Business Continuity Plan
(BCP) and Disaster Recovery (DR) of the
depositories and the stock exchanges
having nation-wide terminals.
ii. Ire-lrade Risk ConlroIs: Order-IeveI
checks, Dynamic Price Bands and Risk
Reduction Mode.
c. Risk Managcmcnt Rcvicw Cnmmiucc
(RMRC)
RMRC was consulted on the matters
related to the risk management framework
of cash and derivatives market with the
view to align the extant risk management
framework with the need of current
market infrastructure. RMRC gave policy
recommendalions on Ire-lrade Risk ConlroIs:
Order-level checks, Dynamic Price Bands and
Risk Reduction Mode.
ZD. Issuance of Guidelines on Business
Continuity Plan (BCP) and Disaster
Recovery (DR) to Stock Exchanges and
Depositories.
Stock Exchange and Depositories are
critical infrastructure providers and therefore
any disruptions (major or minor) in their
activities have the potential to threaten the
stability / integrity of markets. Keeping in
view of the same, broad guidelines to stock
exchange and depositories for Business
continuity and Disaster recovery was issued
in the month of April 2012 with main
objective to ensure that all critical operations
are restored within 4 hours, with maximum
permissible data loss of 30 minutes.
III. Corporate Debt Market
Debt markets play an important role in
lhe hnanciaI markels. The scoe of cororale
debt market is immense in India and with
the concerted efforts of SEBI, the market
has begun seeing encouraging trends. In
the corporate debt market, ` 3,61,462 crore
were raised through 2,489 issues by way of
private placement listed at BSE and NSE
in 2012-13 as compared to ` 2,61,282 crore
through 1,953 issues raised in 2011-12,
mirroring the stronger growth sentiments in
the market.
34
A. Standardisation of the Application
Form and Abridged Prospectus for
Public Issue of Debt Securities
In order to make the public issue
application form more investor friendly
and provide meaningful information in a
simple manner, in July 2012, SEBI prescribed
the structure, design, format, contents and
organisation of information in the Application
Form and Abridged Prospectus so as to
standardize it and to make it uniform for
public issues of debt securities.
B. Online System for making Application
to Public Issue of Debt Securities
In July 2012, SEBI issued guidelines in
order to facilitate a system for making online
applications for public issue of debt securities
and to reduce the timelines of the issue
process for public issue of debt securities.
This also assists in wider public participation,
reducing issuer cost while enabling listing of
securities in a faster and time bound manner.
C. St andardi zed Offer Document /
Memorandum in Public Issue & Listing
of Non-Convertible Debt as well as
Privately Placed Debt Securities which
are Listed or Proposed to be Listed.
A standardized format on the bond
offering documentation was put in place
to facilitate the better understanding and
preparation of such documents by issuers
as well as ease investors decision making
rocess. The slandardisalion of lhese oer
documents may also increase the tradability
of these corporate bonds among players and
can support secondary market liquidity.
D. Prnpnscd Nnticatinn nI Rcgu!atinns
for Issuance and Listing of Redeemable
Non-Convertible Preference Shares
For provi di ng a comprehensi ve
regulatory framework for issuance and listing
of non-convertible redeemable preference
shares, SEBI Board approved the SEBI
(Issue and Listing of Non-Convertible
Redeemable Preference Shares) Regulations,
2013. As in case of SEBI (Issue and Listing
of Debt Securities) Regulations, 2008, the
proposed Regulations provide framework
for public issuance of non-convertible
redeemable preference shares and also listing
of privately placed redeemable preference
shares. Considering the risks involved in
the instrument, certain requirements like
minimum tenure of the instruments (3
years), minimum rating (AA- or equivalent)
elc. have been secihed in case of ubIic
issuances. For listing of privately placed
non-convertible redeemable preference
shares, minimum application size for each
inveslor is hxed al Ruees Ten Lakhs. As
per Basel III norms, Banks can issue non-
equity instruments such as Perpetual Non-
Cumulative Preference Shares and Innovative
Perpetual Debt Instruments, which are
in compliance with the specified criteria
for inclusion in Additional Tier I Capital.
The proposed Regulations would also be
applicable to aforesaid instruments issued
by banks, subject to compliance with the
provisions of Companies Act, 1956 or/ and
any other applicable laws and such other
condilions lhal may be secihed by SII and
subject to making adequate disclosures and
reIevanl risk faclors in lhe oer documenl.
IV. Mutual Funds
The year 2012-13 proved to be an
eventful year for mutual funds, ushering
various changes aiming at re-energising
growth, development and regulation of the
mutual fund industry. The changes indeed
exemplified the philosophy of SEBI of
fusing development, regulation and investor
protection in an eeclive manner.
35
The developmental approach was
reecled in fungibiIily of lolaI exense ralio
(TER),additional expense ratios allowed to
be charged for penetration beyond the major
cilies, ermiuing charging of service lax on
investment and advisory fees by the scheme
over and above the maximum limit of the
total expense ratio, introducing a new cadre
of dislribulors vilh simIihed cerlihcalion
and registration requirements, introduction
of a separate plan for direct investments,
requirement of setting aside a portion of
the daily net assets for investor education,
ermiuing cash inveslmenls in muluaI fund
schemes, allowing distributors to opt in/
out of transaction charges based on type of
product, enabling participation of mutual
funds in credit default swaps as users or
protection buyers, changes in the framework
for participation of mutual funds in repo in
corporate bonds, for RGESS compliant mutual
fund schemes - extending the timeline of
iniliaI oering eriod and eriod for refund,
allotment and dispatch of account statement
and enabling Gold Exchange Traded Funds to
invest in the Gold Deposit Schemes of banks.
On the regulatory and investor protection
fronl, lhe foIIoving vas decided: crediling of
exit loads charged to the scheme, claw back
of the additional expense ratios charged on
accounl of inovs beyond lhe lo 15 cilies
if the investment is redeemed within a year,
disclosures in the half yearly report of Trustees
regarding lhe eorls underlaken by lhem lo
increase geographical penetration of mutual
funds and the details of opening of new
branches, launch of schemes under a single
plan and ensuring that all new investors are
subject to a single expense structure, creation
of a Unique Identity Number by Association
of Mutual Funds in India (AMFI) for sales
persons of distributors, inclusion of mis-
selling of mutual fund units as a fraudulent
and unfair trade practice under the relevant
ReguIalions, enabIing seuing u of a SeIf
Regulatory Organisation for distributors,
harmonizing applicability of net asset values
across schemes, directing the mutual funds to
disclose monthly portfolio for all their schemes
in a standard format on their respective
website , prudential limits and disclosures on
portfolio concentration risk in debt oriented
schemes, disclosures on distributor wise
gross and nel inovs, average assels under
management (AUM) and ratio of AUM to
gross inovs and inlroduclion of roducl
labelling in mutual funds.
A detailed description of the steps
inilialed during 2012-13 is as foIIovs:
A. Total Expense Ratio (TER)
Fungibility of TER was enabled by
removal of the sub-limits on investment
management and advisory fees within the
TER.
In order to enhance penetration of
mutual funds beyond the top 15 cities, it was
decided that additional TER can be charged
up to 30 basis points on daily net assets of the
scheme as per regulation 52 of SEBI (Mutual
Iunds) ReguIalions, 1996, if lhe nev inovs
from beyond top 15 cities are at least (a) 30
ercenl of gross nev inovs in lhe scheme
or (b) 15 percent of the average assets under
management (year to date) of the scheme,
whichever is higher.
In case inovs from beyond lo 15 cilies
is less than the higher of (a) or (b) above,
additional TER on daily net assets of the
scheme shall be charged on a proportionate
basis.
The top 15 cities shall mean top 15 cities
based on Association of Mutual Funds in
36
India (AMFI) data on AUM by Geography
Consolidated Data for Mutual Fund Industry
as al lhe end of lhe revious hnanciaI year.
Further, the additional expenses,
incurred lovards dierenl heads ermissibIe
under the Regulations, not exceeding 20
bps of daily net assets of the scheme, were
allowed to be charged to the scheme.
In case of a fund of funds scheme,
the total expenses of the scheme including
weighted average of charges levied by the
underlying schemes shall not exceed 2.50
percent of the daily net assets of the scheme.
a. Clawback of Additional TER and
Disclosures on Penetration
The additional TER on account of
inovs from beyond lo 15 cilies so charged
shall be clawed back in case the same is
redeemed within a period of 1 year from
the date of investment. Mutual funds/AMCs
shall make complete disclosures in the half
yearly report of Trustees to SEBI regarding
lhe eorls underlaken by lhem lo increase
geographical penetration of mutual funds
and the details of opening of new branches,
especially at locations beyond top 15 cities.
b. Credit of Exit Load to the Scheme
It was decided that the exit load charged,
if any, would be credited to the scheme.
c. Service tax
It was mandated that Mutual funds /
AMCs may charge service tax on investment
and advisory fees to the scheme in addition
to the maximum limit of TER as prescribed
in regulation 52 of the SEBI (Mutual Funds)
Regulations, 1996. Service tax on other than
investment and advisory fees, if any, shall be
borne by the scheme within the maximum limit
of TER as per regulation 52 of the Regulations.
Service tax on exit load, if any, shall be paid
out of the exit load proceeds and exit load
net of service tax, if any, shall be credited
to the scheme. Service tax on brokerage and
transaction cost paid for asset purchases, if
any, shall be within the limit prescribed under
regulation 52 of the Regulations.
d. Brokerage and Transaction Cost
The brokerage and transaction cost
incurred for the purpose of execution of trade
may be capitalized to the extent of 12 bps
and 5 bps for cash market transactions and
derivatives transactions respectively. Any
payment towards brokerage and transaction
cost, over and above the said 12 bps and
5 bps for cash market transactions and
derivatives transactions respectively may be
charged to the scheme within the maximum
limit of TER as prescribed under regulation
52 of the SEBI (Mutual Funds) Regulations,
1996. Any expenditure in excess of the said
prescribed limit (including brokerage and
transaction cost, if any) shall be borne by the
AMC or by the trustee or sponsors.
B. Investor Education and Awareness
It was decided that Mutual Funds/
AMCs shall annually set apart at least 2
basis points on daily net assets within the
maximum limit of TER as per regulation 52
of the Regulations for investor education
and awareness initiatives. Mutual Funds
shall make complete disclosures in the half
yearly trustee report to SEBI regarding the
investor education and awareness initiatives
undertaken.
C. Single Plan Structure for Mutual Fund
Schemes
It was mandated that Mutual funds/
AMCs shall launch schemes under a single
plan and ensure that all new investors are
37
subject to single expense structure. Existing
schemes with multiple plans based on the
amount of investment (i.e. retail, institutional,
super-institutional, etc) shall accept fresh
subscrilions onIy under one Ian, and olher
plans will continue till the existing investors
remain invested in the plan.
D. Separate Option for Direct Investments
It was decided that Mutual funds/
AMCs shall provide a separate plan for
direct investments, i.e., investments not
routed through a distributor, in existing as
well as new schemes. Such separate plan
shall have a lower expense ratio excluding
distribution expenses, commission, etc., and
no commission shall be paid from such plans.
The plan shall also have a separate NAV.
E. New Cadre of Distributors
A new cadre of distributors, such as
postal agents, retired government and semi-
governmenl ociaIs (cIass III and above or
equivalent) with a service of at least 10 years,
retired teachers with a service of at least 10
years, relired bank ocers vilh a service of
at least 10 years, and other similar persons
(such as Bank correspondents) as may be
nolihed by AMII/AMC from lime lo lime,
shall be allowed to sell units of simple and
performing mutual fund schemes. Simple
and performing mutual fund schemes shall
comrise of diversihed equily schemes, hxed
maturity plans (FMPs) and index schemes
and shouId have relurns equaI lo or beuer
than their scheme benchmark returns during
each of the last three years. These distributors
vouId require a simIihed form of NISM
cerlihcalion and AMII Regislralion.
F. Unique Identity Number (UIN) for
Employees of Distributors
AMFI shall create a UIN of the
employee/ relationship manager/ sales
person of the distributor interacting with the
investor for the sale of mutual fund products,
in addition to the AMFI Registration Number
(ARN) of the distributor. The application
form for mutual fund schemes shall have
provision for disclosing the UIN of such
sales personnel along with the ARN of the
distributor.
G. Harmonizing applicability of Net Asset
Value(NAV) across schemes
It was decided that in respect of
purchase of units of mutual fund schemes
(other than liquid schemes), the closing
NAV of the day on which the funds are
available for utilisation shall be applicable
for application amount equal to or more than
2 lakh, irrespective of the time of receipt of
such application.
H. Monthly Portfolio Disclosures
It was mandated that Mutual funds/
AMCs shall disclose portfolio (along with
ISIN) as on the last day of the month for all
their schemes on their respective website on
or before the tenth day of the succeeding
month in a user-friendly and downloadable
format (preferably in a spreadsheet). Further,
the format for monthly portfolio disclosure
shall be same as that of half yearly portfolio
disclosures. Also, Mutual funds/AMCs may
disclose additional information (such as
ratios, etc.) subject to compliance with the
Advertisement Code.
I. Cash Investments in Mutual Funds
In order to help enhance the reach
of mutual fund products amongst small
investors, who may not be tax payers and
may not have PAN/bank accounts, such as
farmers, small traders/businessmen/workers,
it was decided that cash transactions in
38
mutual funds to the extent of 20,000 per
inveslor, er muluaI fund, er hnanciaI year
shall be allowed subject to compliance with
Prevention of Money Laundering Act, 2002
and Rules framed there under, the SEBI
Circular(s) on Anti Money Laundering (AML)
and other applicable AML rules, regulations
and guideIines and sucienl syslems and
procedures in place. Repayment in the form
of redemptions, dividend, etc. with respect
to aforementioned investments shall be paid
only through banking channel.
J. Prudential Limits and Disclosures on
Portfolio Concentration Risk in Debt-
Oriented Mutual Fund Schemes
It was decided that Mutual funds/AMCs
shall ensure that total exposure of debt
schemes of mutual funds in a particular sector
(excluding investments in Bank CDs, CBLO,
G-Secs, T-Bills and AAA rated securities
issued by Public Financial Institutions and
Public Sector Banks) shall not exceed 30
percent of the net assets of the scheme.
Iurlher, an addilionaI exosure lo hnanciaI
services sector (over and above the limit of 30
percent) not exceeding 10 percent of the net
assets of the scheme shall be allowed by way
of increase in exposure to Housing Finance
Companies (HFCs)only. Also, the additional
exposure to such securities issued by HFCs
are rated AA and above and these HFCs are
registered with National Housing Bank (NHB)
and the total investment/ exposure in HFCs
shall not exceed 30 percent of the net assets
of the scheme. Existing schemes shall comply
with the aforementioned requirement within
a period of one year from the date of issue
of this circular. During this one year, total
exposure of existing debt schemes of mutual
funds in a particular sector should not increase
from the levels existing (if above 30 percent) as
on the date of issuance of this circular.
K. Transaction Charges
It was decided that distributors shall also
have the option to either opt in or opt out of
levying transaction charge based on type of
the product.
L. Disclosure with Respect to Half Yearly
Financial Results
Mutual funds/AMCs shall make half
yearIy discIosures of lheir unaudiled hnanciaI
results on their respective website in a user-
friendly and downloadable format (preferably
in a spreadsheet).
M. Additional Disclosures
Mutual funds/AMCs shall, in addition
to the total commission and expenses paid
to distributors, make additional disclosures
regarding distributor-wise gross inflows
(indicating whether the distributor is an
associate or group company of the sponsor(s)
of lhe muluaI fund), nel inovs, average
assets under management and ratio of
AUM lo gross inovs on lheir reseclive
website on an yearly basis. In case the data
mentioned above suggests that a distributor
has an excessive portfolio turnover ratio, i.e.
more than two times the industry average,
AMCs shall conduct additional due-diligence
of such distributors. Mutual Funds / AMCs
shall also submit the said data to AMFI and
the consolidated data in this regard shall be
disclosed on AMFI website.
N. Participation of Mutual Funds in Credit
Default Swaps (CDS) Market as Users
(Protection Buyers)
It was decided to permit mutual funds
to participate in CDS market, as per the
guidelines issued by RBI from time to time,
sub|ecl lo lhe foIIoving condilions:
a. Mutual funds shall participate in CDS
transactions only as users (protection
39
buyer ). Thus, mutual funds are
ermiued lo buy credil roleclion onIy
to hedge their credit risk on corporate
bonds they hold. They shall not be
allowed to sell protection and hence not
ermiued lo enler inlo shorl osilions in
the CDS contracts. However, they shall
be ermiued lo exil lheir boughl CDS
positions, subject to para d below.
b. Mutual funds can participate as users
in CDS for the eligible securities as
reference obligations, constituting from
within the portfolio of only Fixed
Maturity Plans (FMP) schemes having
tenor exceeding one year.
c. Mutual funds shall buy CDS only from
a market maker approved by the RBI
and enter into Master Agreement with
the counterparty as stipulated under
RBI Guidelines. Exposure to a single
counterparty in CDS transactions shall
not exceed 10 percent of the net assets of
the scheme.
d. The cumulative gross exposure through
credit default swap in corporate bonds
along with equity, debt and derivative
positions shall not exceed 100 percent of
the net assets of the scheme.
e. The total exposure related to premium
paid for all derivative positions,
including CDS, shall not exceed 20
percent of the net assets of the scheme.
f. Before undertaking CDS transactions,
muluaI funds shaII ul in Iace a vriuen
policy on participation in CDS approved
by the Board of the Asset Management
Company and the Trustees as per the
guideIines secihed by RI and SII.
The policy shall be reviewed by mutual
funds, at least once a year.
g. To enable the investors in the mutual
funds schemes to take an informed
deci si on, t he concerned Scheme
Information Document (SID) shall
disclose the intention to participate
in CDS transaction in corporate debt
securities in accordance with directions
issued by RBI and SEBI from time
to time, and related information as
appropriate in this regard.
h. Mutual funds shall also disclose the
details of CDS transactions of the
scheme in corporate debt securities in
the monthly portfolio statements as
well as in the half yearly trustee report,
as per the prescribed format. Further,
mutual funds shall disclose the scheme-
wise details of CDS transactions in the
notes to the accounts of annual report
of the mutual fund as per the prescribed
format.
i. Mutual funds participating in CDS
transactions, as users, shall be required
to comply with the guidelines issued by
RI, vide nolihcalion no. IDMD.ICD.
No.5053/14.03.04/2010-11 dated May 23,
2011 and subsequent guidelines issued
by RBI and SEBI from time to time.
O. Participation of Mutual Funds in Repo
in Corporate Debt Securities
In order to encourage growth of the
corporate bond market, it was decided
that the base of eligible securities may be
expanded, for mutual funds to participate in
repo in corporate debt securities, from AAA
rated to AA and above rated corporate debt
securities.
P. Investment by Gold Exchange Traded
Funds (ETFs) in Gold Deposit Schemes
(GDS) of banks
GDS of banks was designated as a gold
related instrument eligible for investment by
GoId ITIs sub|ecl lo lhe foIIoving:
40
a. The total Investment in GDS will not
exceed 20 percent of total AUM of such
schemes.
b. MuluaI funds shaII ul in Iace a vriuen
policy with regard to investment in GDS
with due approval from the Board of the
Asset Management Company and the
Trustees, which should have provision to
make it necessary for the mutual funds
to obtain prior approval of their trustees
for each investment proposal in GDS of
any Bank. The policy shall be reviewed
by mutual funds, at least once a year.
c. Gold certificates issued by Banks in
respect of investments made by Gold
ETFs in GDS shall be held by the mutual
funds only in dematerialized form.
Q. Product Labeling in Mutual Funds
In order to address the issue of mis-
selling, it was decided that all the mutual
funds shall Label their schemes on the
aramelers as menlioned under:
a. Nature of scheme such as to create
wealth or provide regular income in an
indicative time horizon (short/ medium/
long term).
b. A brief about the investment objective (in
a single line sentence) followed by kind
of product in which investor is investing
(Equity/Debt).
c. Level of risk, depicted by colour code
boxes as under:
i. Blue principal at low risk.
ii. Yellow principal at medium risk.
iii. Brown principal at high risk.
d. A disclaimer that investors should
consuIl lheir hnanciaI advisers if lhey
are not clear about the suitability of the
product.
Further, the product label would
be disclosed in the Scheme Information
Document s ( SIDs) , Key Inf ormat i on
Memorandums (KIMs), front page of initial
application forms, common application forms
and scheme advertisements in a prominently
visible manner.
The Circular is applicable from July 01,
2013 to all existing schemes and schemes
launched thereafter.
R. Inclusion of Mis-Selling of Units of
Mutual Fund Schemes as a Fraudulent
and Unfair Trade Practice
The SEBI(Prohibition of Fraudulent and
Unfair Trade Practices Relating to Securities
Market) (Amendment) Regulations, 2012 were
nolihed on December 11, 2012 enabIing lhe
inclusion of mis-selling of units of mutual
fund schemes as a fraudulent and unfair
lrade raclice. Mis-seIIing vas dehned as
sale of units of a mutual fund scheme by any
person, directly or indirectly, by -
a. making a false or misleading statement,
or
b. conceaIing or omiuing maleriaI facls of
the scheme, or
c. concealing the associated risk factors of
the scheme, or
d. not taking reasonable care to ensure
suitability of the scheme to the buyer.
5. Enab!ing scuing up nI a 5c!I Rcgu!atnry
Organisation (SRO) for Distributors
To enable the setting up of an SRO
for distributors, the SEBI (Self Regulatory
Organisations) (Amendment) Regulations,
2013 vere nolihed on }anuary 07, 2013, vhich
stated that distributors shall be deemed as
intermediaries. Further, by a notification
dated January 08, 2013 under sub-regulation
(2) of regulation 1 of the SEBI (Self Regulatory
41
Organisations) Regulations, 2004, the date of
lhe nolihcalion vas decIared as lhe dale on
which the Regulations shall come into force
in relation to distributors engaged by asset
management companies of mutual funds.
A public notice was issued on March 21,
2013 inviting applications from any group
or association of intermediaries which
are desirous of being recognized as a Self
Regulatory Organisation in terms of SEBI
(Self Regulatory Organisations) Regulations,
2004 for distributors of mutual fund products,
by making an application as prescribed in the
said Regulations.
V. Alternative Investment Funds
A. Regulations Notification of SEBI
( Al t ernat i ve Invest ment Funds)
Regulations, 2012
In May 2012, the SEBI (Alternative
Investment Funds) Regulations, 2012 (AIF
ReguIalions) vere nolihed. Ior lhe urose
of framing the regulations, market comments
were also elicited on a concept paper
prepared and placed on SEBI website for
public comments. The Regulations require
all pooling vehicles /funds such as Private
Equity Funds, Real Estate Funds, Hedge
Funds, etc. to register with SEBI. The
Regulations endeavor to extend the perimeter
of regulation to unregulated funds, enhance
syslemic slabiIily, increase markel eciency,
encouraging formation of new capital and
investor protection. The regulations also seek
to address regulatory gaps with respect to
oversight requirements under the venture
capital regulations.
VI. Investment Advisors
A. Notification of SEBI (Investment
Advisors) Regulations, 2013
In January 2013, the SEBI (Investment
Advisors) ReguIalions, 2013 vere nolihed,
t hereby provi di ng a f ramework f or
registration and regulation of Investment
Advisors. The Regulations require all
individuals, body corporate and partnership
hrms engaged in lhe business of roviding
i nvest ment advi ce t o i nvest ors f or
consideration to be registered and regulated
under these Regulations. The regulations
come inlo eecl from AriI 21, 2013.
VII. Foreign Institutional Investors
(FIIs)
A. Qualified Foreign Investors (QFI)
Framework
In line with the union budget speech
2011 and subsequent press release by
Government of India, it was decided to allow
foreign inveslors lermed as QuaIihed Ioreign
Investors (QFI), who meet the prescribed
KYC norms, to invest in Indian equity shares,
mutual funds and corporate debt subject to
the prescribed terms and conditions. Vide
SEBI circulars dated August 9, 2011 and
January 13, 2012, the framework for QFI
investment in mutual funds and equity shares
has been prescribed. Subsequently, the QFI
framework has been liberalised/ revised vide
circulars dated June 07, 2012, July 18, 2012
and July 20, 2012.
The revision in QFI framework primarily
reIales lo lhe foIIoving:
a. The dehnilion of QII has been videned
to include resident of a country which is
a member of group which is a member
of FATF and who is a signatory to
IOSCO MMoU or a signatory of a
bilateral MoU with SEBI.
b. QFIs are allowed to invest in debt
schemes of Indian mutual funds and
corporate debt.
42
c. QFIs can open a single non-interest
bearing rupee account with any AD
Category-1 bank in India for making
investment through this route, subject to
the conditions as may be prescribed by
RBI from time to time.
d. The QFI has been extended the option
to appoint custodian of securities
for clearing and settlement of its
transactions, provided such custodian is
aIso lhe quaIihed DI of lhe QII.
e. A separate investment limit of USD one
billion created for QFI investment in
corporate debt.
f. A separate investment limit of USD
three billion created for QFI investment
in Mutual Fund Infrastructure Debt
Scheme.
B. Know Your Cl i e nt ( KYC)
5imp!icatinn
During Selember 2012, SII simIihed
the Know Your Client (KYC) requirements for
foreign investors making investment through
the portfolio route. The prominent relaxations
are as foIIovs:
a. KYC forms may be hIIed and signed
by Global Custodian (GC), if Power
of Auorney is given by III / SA lo lhe
GIobaI Cuslodian,
b. The requirement to provide names,
residential address, photograph, proof
of identity and proof of address of
individual promoters, partners/trustees,
whole time directors of foreign investor
has been waived if the Global Custodian
(GC) gives an undertaking to provide
the documents as and when requested
by lhe inlermediary,
c. Special exemptions have been made for
SWF entities, Foreign Govt. Agencies,
Central Bank, Govt. pension funds and
International or Multilateral Agencies.
C. Introduction of Auction Calendar
Vide circular dated April 27, 2012 it was
decided that the auction of debt limits would
be conducted on 20th of every month (if
20th is holiday, auction shall be done on the
next working day), based on availability of
free limits at the end of respective previous
month. The auction shall be conducted if the
free limit in any category (Government debt
long term, corporate debt old and Corporate
Debt Long Term Infra) is more than ` 1,000
crore, in lhe manner summarized beIov:
Particulars Details
Duration of bidding: 2 hours (15:30 lo 17:30 hrs)
Access to platform Trading members or
custodians
Minimum bid ` 1 crore
Maximum bid ` 250 cr. or one-tenth of free
limit whichever is higher
Tick Size ` 1 crore
Allocation Price time priority
Methodology
Pricing of bid minimum al fee of ` 1000
or bid price whichever is
higher
Bidding date 20th of every month (if 20th
is holiday, auction shall be
done on next working day)
Time period for 90 days for corporate debt
utilisation of the old and corporate debt long
limits term infra category and 45
days for Government debt
old and Government debt
long term category
Auction Platform Alternatively on BSE & NSE
D. FII Investments in Government Debt
Long and Corporate Debt Long Term
Infra Categories
a. Government Debt Long Term category
was enhanced to USD 10 billion. The
residual maturity requirement for
43
investment in this category was reduced
uniformly from 5 years to 3 years
b. For the Corporate Debt Long Term
Infra category, the lock-in period for
investments was uniformly reduced to
one year while the residual maturity
requiremenl al lhe lime of hrsl urchase
vas sel lo hfleen monlhs
c. The additional limit for FIIs investments
in Government debt long term category
and the limits for corporate debt long
term infra category (with one year lock-
in and 15 months residual maturity),
were allocated through a special auction
on July 04, 2012.
E. FII Debt Investment Provisions:
Relaxations
a. SEBI had provided the facility of re-
investment up to two years from the
date of the circular or to the extent of
twice the size of the debt portfolio, to
those FIIs and sub-accounts that had
already acquired limits and /or invested
in debt in the manner prescribed in the
said circular. With a view to provide
oeralionaI exibiIily, beginning }anuary
01, 2014, it has been decided that the
FIIs/ Sub-Accounts can re-invest during
each calendar year to the extent of 50
percent of their debt holdings at the end
of lhe revious caIendar year,
b. The time period for utilisation of the
Government debt limits (for both old
and long term limits) allocated through
bidding process was reduced to 30 days
while the time period for utilisation of
the corporate debt limits (for both old
and long term infra limits) allocated
through bidding process shall be 60
days,
c. FII/sub-accounts may avail limits
in the Corporate Debt Long Term
Infra category without obtaining SEBI
approval till the overall FII investments
reaches 90 percent, after which the
auction mechanism shall be initiated for
allocation of remaining limits. SEBI will
put in place a mechanism to monitor the
utilisation of the limit.
F. FII Debt Limits: Operational Flexibility
In order lo rovide oeralionaI exibiIily
to those FIIs / sub-accounts which did not
hold debt investment limits as on January 03,
2012 and purchased debt limits thereafter,
it was decided that they shall be allowed a
cumulative re-investment facility to the extent
of 50 percent of their maximum debt holding
at any point of time during the calendar year
2013. The circular in this regard was issued
on January 01, 2013.
G. FII Debt Limits: Increase in Limits and
Relaxation in Lock-In and Residual
Maturity
a. An addilion Iimil of USD hve biIIion
each was made available under the
Government Long Term category
and Corporate Bond Old (non infra)
category respectively.
b. The requirement of 3 years residual
maturity under the Government Long
Term category was done away with.
However, FIIs cannot invest in short
term papers such as treasury bills under
this category.
c. The requirement of initial maturity of 5
years and lock-in period of 12 months
under Corporate Long Term Infra
category was done away with.
44
H. Reporting of Offshore Derivative
Instruments (ODIs)/ Participatory Notes
(PNs) Activity
For streamlining the reporting of
PNs (Participatory Notes)/ODIs (Offshore
Derivalive Inslrumenls) il vas decided lhal:
the FIIs issuing ODIs/PNs shall submit details
of ODI/PN transaction report along with the
monthly summary report by 10th of every
month for previous months ODI transactions.
I. Activity nI Cnmmiuccs
Commi ttee on Rati onal i sati on of
Investment Routes and Monitoring of Foreign
Portfolio Investments
SEBI Board in its meeting held on
October 06, 2012 has decided that SEBI
will prepare a draft guideline based on the
guidance of the Working Group on Foreign
Investment (WGFI), for consideration of the
Government of India (GoI). It was also decided
that SEBI/RBI will create necessary regulatory
framework based on the guidelines, which will
be laid down by the GoI.
Accordingly, in order to implement
the above Boards decision, SEBI has
formed a Committee on rationalisation
of investment routes and monitoring of
foreign portfolio investments, under the
Chairmanship of Shri K. M. Chandrasekhar,
comprising of representatives from GoI,
RBI and various market participants to
review, make recommendations and to
prepare a draft guideline and regulatory
framework for an integrated policy on foreign
investments, keeping as a starting point, the
recommendations of the Working Group
on Foreign Investment in India (WGFI), for
consideration of the Government.
The committee held its meetings on
February 18, 2013 and March 19, 2013. The
commiuee has formed lvo sub commiuees viz.
Sub Commiuee on KYC and Sub Commiuee
on Treatment of Foreign Investments.
VIII.Takcnvcrs
Amendment s t o SEBI ( Subst ant i al
Acquisition of Shares and Takeovers)
Regulations, 2011
SEBI reviewed the provisions of the
SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011 (Takeover
Regulations) in respect of which certain
concerns were raised during implementation.
Such rovisions are oulIined beIov:
a. It is now clarified that if the voting
rights of a shareholder, increase beyond
the prescribed threshold limit pursuant
to buyback by the target company, he
shall be exempt from the obligation to
make open offer if the voting rights
are brought below the threshold limit
within 90 days from the date on which
the voting rights was increased and the
period of 90 days will be reckoned from
lhe dale of cIosure of lhe buyback oer.
b. Where lhe oen oer obIigalions are
triggered pursuant to an agreement or
otherwise in combination of any modes
of acquisition, the relevant date for
making the Public Announcement and
determination of offer price shall be
the earliest date on which obligations
are triggered subject to appropriate
di s cl os ur es of t he s ubs equent
acquisilions in lhe oer documenl.
c. The relevant date for making the Public
Announcement pursuant to an acquirer
acquiring shares, voting rights or control
in target company subsequent to the
referenliaI issue has been modihed as
the date on which the Board of Directors
of the target company authorize such
preferential issue.
45
d. In order to bring parity in disclosure
requirements among various SEBI
regulations, the disclosure requirement
with regard to buy or sell of two
percent by persons holding more than
five percent as specified in Takeover
Regulations has been modified in
line with SEBI (Prohibition of Insider
Trading) Regulations, 1992.
e. It is clarified that acquisition made
during lhe oen oer eriod lhrough
stock exchange can be completed in
accordance vilh lhe normaI seuIemenl
process applicable to the stock exchange
mechanism subject to such shares being
kept in an escrow account.
IX. Investor Assistance and Education
A. SCORES
SEBI issued a circular on August 13,
2012 directing all companies whose securities
are listed on stock exchanges to obtain
SCORES authentication by September 14,
2012, in accordance with the terms of
earlier dated June 3, 2011. SEBI, vide this
circular, also directed the companies to take
appropriate necessary steps within seven
days of receipt of complaint by the concerned
company through SCORES, so as to resolve
the complaint within 30 days of receipt of
complaint and also keep the complainant
duly informed of the action taken thereon. In
case of failure to comply with the circular, it
was informed that SEBI would be constrained
to initiate enforcement actions as per the law
as may be deemed appropriate.
X. Legal Framework
A. Mndicatinn nI Guidc!incs nn Cnnscnt
and Cnmpnsitinn nI Ocnccs
a. SEBI had issued a circular dated April
20, 2007 on the framework for arriving at
seuIemenl lerms for considering requesls
for comosilion of oences/defauIls.
b. On the basis of the experience gained
and with the purpose of providing more
clarity on its scope and applicability
and for making the mechanism more
transparent by providing standard
guidelines/ formulae for arriving at the
seuIemenl lerms, lhe aforesaid circuIar
vas modihed vide circuIar daled May
25, 2012.
c. The salient features of the modified
circuIar are summarised as beIov:
i. Certain defaults including insider
trading, front running, failure to
make an open offer, mandated
di scl osures, non-redressal of
investor grievances and non-
response to the summons issued
by SEBI would be excluded from
the consent process. The defaults
falling in the category of fraudulent
and unfair trade practices, which in
the opinion of SEBI are very serious
and/or have caused substantial
losses to the investors, are also held
to be non consentable.
ii. No consent application is to be
considered, if any violation is
commiued vilhin a eriod of lvo
years from the date of any consent
order. However, if the applicant
has already obtained more than
two consent orders, no consent
application shall be considered for a
period of three years from the date
of the last order.
iii. No consent application is to be
considered by SEBI before the
completion of investigation /
46
inspection, if any.
iv. In respect of proceedings pending
before the SEBI, no consent
application is to be considered if
hIed afler sixly days from lhe dale
of the service of the show cause
notice.
d. The consent terms shall be determined
in lerms of lhe guideIines secihed and
referred to in the modified circular,
which inter alia, provide for the
following objective parameters for
delermining lhe consenl lerms:
i. A minimum Benchmark Amount
for each category of defaul t
auribulabIe lo lhe defauIl/vioIalion
for which the show cause notice is
issued or may be issued.
ii. The Benchmark Amount to take
into consideration the penalty
imposed by the Adj udicating
Ocer (AO) and lhe order assed
by the Whole Time Member (WTM)
as the case may be.
iii. Additional amounts for previous
def aul t s/ t rack record of t he
applicant.
iv. Weightage given to the stage of the
proceeding, nature of the default/
violation, gravity of the default/
violation, volume traded, price
imacl, nel vorlh, rohls made,
nature of disclosure not made, its
impact, etc.
e. The consent terms also provides for non
monelary seuIemenl viz. disgorgemenl
of ill-gotten profits, etc if considered
necessary.
f. The High Iovered Advisory Commiuee
(HPAC)/ Panel of WTMs is empowered
to enhance or reduce the settlement
amount considering the seriousness of
the cases as per the scheme of the Act,
or even refuse to consider the case under
the consent process.
g. The circular also provides for non-
consideration of subsequent application
with respect to the same default which
has been rejected earlier and disposal
of the consent application expeditiously
preferably within a period of six months
from the date of registration of the
consent application.
XI. Retrospect and Prospects
A. Retrospect
The economy was exposed to the vagaries
of turmoil and pressure receding from the
gIobaI environmenl. The dovnlurn magnihed
in the FY13. However the reform agenda
underlaken in lhe Iauer haIf of 2012-13 raised
hopes of the upturn. The estimates of GDP
growth stood at 5 percent for FY13, mirroring
the lowest rate in a decade and backed by the
weakening activity in industry and services
sector. IIP growth has declined further to only
1.0 percent when compared with a growth of
2.9 ercenl in lhe revious hscaI year. Services
too declined along with the agriculture thus
shrinking the total output of the economy.
The savings rate declined in 2011-12 to
30.8 ercenl of lhe GDI vilh hnanciaI savings
of the household being only 8 percent, the
lowest over a decade. The gap in savings and
investments widened to 4.2 percent of GDP,
being hnanced increasingIy by lhe cailaI
ovs. The hgure for lhe Currenl Accounl
Dehcil (CAD) vas al 5.4 ercenl for lhe hrsl
nine months of FY13. The policy reforms, hike
in gold import duties and reducing subsidy
on diesel and LPG have nonetheless paved
47
the path to recovery as indicated by the swing
in financial markets. Liquidity conditions
and credit growth remain subdued in wake
of sIuggish economic aclivily. Inalion has
shovn signs of cooIing lhough food inalion
is still sticky.
The global scenario touched upon the
Indian trade and the exports are expected to
register a mild decline in 2012-13. Imports
reduced marginally on account of high
customs duty on gold. Exchange rate too
uclualed in resonse. Monelary lighlening
followed by policy easing is anticipated to
have lhe desired inuence on lhe economy.
The securities market remained well
reflective of the progression in global
economic state. The Sensex which closed at
17, 404 on March 30, 2012, touched 20,000
level, ended at 18,836 on March 28, 2013,
registering a growth of 8.2 percent compared
to a decline of 10.5 percent seen in the
revious hscaI year. Nifly as veII vilnessed
the uneven trends and closed at 5,683 on
March 28, 2013 vhiIe lhe hgure for March
30, 2012 was at 5,296. The index registered
a growth of 7.3 percent against a decline in
grovlh of 9.2 ercenl in lhe Iasl hscaI year.
The launch of MCX-SX into equity and
equity derivative segment was a welcome
development in the securities market. World
Federation of Exchanges (WFE) figures
also outline India turning to be a better
performing market in the calendar year 2012
owing to renewed investor faith on back of
government reforms.
While the turnover in cash market at
both the exchanges decreased, the market
capitalisation increased by 2.8 percent at
BSE and 2.3 percent at NSE. The market
capitalisation to GDP ratio of BSE was 63.7
percent while it was 62.2 percent for NSE for
lhe hnanciaI year 2012-13.
The turnover at both NSE and BSE
in equity derivatives segment showed an
increase in 2012-13 while that at the currency
derivative segment declined at two of the
exchanges. The explosion in the number of
contracts at BSE remains a major highlight in
the FIA Annual Survey 2012.
The financial year 2012-13 also saw
the primary market picking up. The total
amount of equity issues mobilised in the
primary market stood at ` 15,474 crore in
2012-13 as against ` 12,857 crore in 2011-12.
Resource mobiIisalion lhrough lhe QuaIihed
Institutions Placement Mode (QIP) and
Institutional Private Placement (IPP) ascended
from 16 issues raising ` 2,163 crore in 2011-
12 to 45 issues raising ` 15,996 crore during
2012-13.
Mutual funds saw a continuing trend
of nel oulov of resources during 2011-12.
Afler lvo conseculive year of nel oulov of
resources, mutual funds in 2012-13 saw a net
inov of resources lo lhe lune of ` 76,539
crore as against ` 22,024 crore in 2011-12.
FII invested ` 1,68,367 crore in the Indian
market in 2012-13 compared to ` 93,725 crore
in 2011-12. The cumulative net investment by
FII stood at USD 1,71,529 million. The various
measures in the securities market signaled a
healthy growth over the previous year and
resonated the strong fundamentals of the
market.
B. Prospects
India, as an economy has made massive
leaps in its growth path in the past decade
buttressed by impressive savings and
investment rates. While demographics
and resources have been at the root of the
advantage India enjoys over its peers, the
execution of the policy and reform measures
that have been taken also need to be given
48
due credit. The strong fundamentals have
reinslaled conhdence in our economy. As er
World Economic Outlook by IMF, April 2013,
while the Emerging market and developing
economies are anticipated to grow by 5.3
percent in 2013, India is projected to grow at
5.7 ercenl. The hnanciaI markels have been
equal contributors to Indias growth trajectory
and continue remaining so reinforced by
sound infrastructure, well laid out regulatory
framework and strong risk management
practices. Thus, despite the recent reduction
in the stellar growth rates, the fact remains
that India is still one of the fastest growing
economies and has a positive outlook.
Securities market in India has evolved
in the wake of a number of reforms and
evolving economic conditions. While the
macro economic prospects currently may
nol Iook auraclive, lhe slrong fundamenlaIs
have assured of positive growth. SEBI has
conslanlIy vorked lo fuIhII ils goaI lhrough
supervision and proactive regulations.
The basic infrastructure for disclosure,
surveillance and trading are robust and
synchronized with global standards.
MeanvhiIe, lhe hnanciaI markels have
been witnessing technological transformation
which calls for a more vigilant and
progressive combination of regulations.
Of late, there have been instances of grey
areas in lhe hnanciaI markels lhal need lo
be brought into the purview of regulation.
Incidents such as unauthorized capital
mobilisation from the gullible investors are
in the cognizance of the authorities and
commensurate steps have been taken. As
the regulatory framework for such activities
is still under construction, it is imperative
for the investors to be well informed of
the financial decisions they take. Today
world over the investors as well as entities
have become vulnerable to the possibility
of fraud through sheer ingeniousness and
innovativeness of perpetrators. The only
antidote to this is increasing the access to
banking and regulated financial services
and awareness of investors and continuous
fine-tuning of regulations to address any
regulatory lacunae. SEBI is committed to
the promotion of awareness of financial
markets in the public domain and would be
conlinuing vilh ils eorls of educaling and
protecting investors through workshops,
Grievance Redressal Mechanism Centre,
seminars and videned shere of IocaI oces.
To this end, FSDC has released its draft
National Strategy of Financial Education to
creale a hnanciaIIy avare and emovered
India. It aims at undertaking a massive
Financial Education campaign to help people
manage money more ecienlIy lo achieve
hnanciaI veII being by accessing aroriale
financial products and services through
regulated entities with fair and transparent
machinery for consumer protection and
grievance redressal.
SEBI has also been easing the process
for investors to enter the securities market.
KYC Centralisation, norms for e-IPOs,
guidelines on Rajiv Gandhi Equity Saving
Scheme, dedicated debt segment on the
stock exchanges, introduction of trading
through periodic call auction for illiquid
scrips and extending the pre-open session
to all other scrips in the equity market are
some of the steps undertaken by SEBI to
ensure more investor participation into the
securities market. The surveillance system
has been eecliveIy moniloring lhe markel
and aberrations are investigated to ensure
a free and fair market. In its endeavour to
widen and deepen the markets, SEBI would
consistently pursue the market developments
and take proactive policy measures.
49
While the Indian securities market is
deemed to be secure and regulated, an area
of concern for the regulator is the lack of
involvement by retail participants. More
and more of domestic savings have been
channelized into physical assets of late and
hnanciaI savings have undergone a marked
decline. Shares and Debentures have seen
even a lower proportion primarily on
account of perceived intricate processes,
want of financial awareness in addition
to the global concerns. Increasing the
individual participation would be precedent
to the further development of our markets.
Measures like introduction of Anchor
investors in IPOs, prohibiting non-retail
investors to withdraw or lower bid size,
discontinuation of mini derivative contracts
on index have been timely taken to take
care of the interests of retail investors in
the market and such measures as and when
required would be adequately taken in the
future as well.
In addition to investor participation,
provision of capital for start-ups and early
venture companies is a priority area. Recent
SEBI initiatives for angel and venture funds
lo hnance slarl-u comanies marks a much
needed beginning in addressing the paucity
of resources for start-up companies across
the country.
Budget announcements related to use of
government and corporate bonds as collateral
by FII, infrastructure debt funds, and
dedicated debt segment on stock exchanges
have been reaIized vhiIe a commiuee on SMI
Exchange is working on the proposal to allow
SMEs to list on the SME exchange platform
vilhoul lhe mandalory iniliaI ubIic oering
and amendment of SEBI Act to strengthen
lhe reguIalor is aIso in rogress. Unihcalion
of norms related to foreign investments in
capital markets is also underway under
lhe guidance of lhe reseclive commiuee.
The budget proposals like allowing AMFI
registered mutual fund distributors to become
members of the mutual fund segment on
stock exchanges, permitting pension and
provident funds to invest in ETFs/debt
mutual funds and asset backed securities
would go a long way in encouraging and
revitalizing the mutual fund industry.
Amendments to Insi der Tradi ng
Regulations to fortify the framework
that protects fair market place is also in
progress. The unleashing of one of the
biggest Insider trading scandal in US has
shifted the regulatory focus to the menace
of insider trading and additional powers to
regulators alike. In the Indian context, the
extant regulatory regime on insider trading
would be reviewed and realigned with the
best practices adopted globally under the
suervision of a high IeveI commiuee.
International co-operation is well sought
to integrate the mainstream markets with
the best practices across the globe. Apart
from strengthening regulatory co-operation
through MoUs with various countries, SEBI
is also an active member of IOSCO while
also being an integral member of the Internal
Working Groups in wider association with
G-20 and FSB. Our openness to the global
markets has seen embracing active work
on contemporary issues of international
relevance like high frequency trading and
social media norms for dissemination of
information by listed companies in the
present. High frequency trading has engaged
attention of regulators worldwide and in
India too, guidelines have been framed to
ameliorate the risks posed by HFT and to
combal lhe auendanl syslemic risk concern.
The assurance to ongoing reforms during
50
the roadshows at various global destinations,
along with measures introduced by SEBI
have ensured renewed interest of the foreign
investors in Indian market
As we preserve our healthy markets, it
is also crucial to promote fair practices that
align with the best in class through stronger
enforcement measures and in harmony with
the technological developments worldwide.
While some segments of the market may
require constantly evolving vigil due to their
ervading eecl, aII grey areas vouId require
immediate intervention. Investor Education
though various measures would continue to
remain a priority area for SEBI. SEBI in its
keenness to promote, protect and deepen the
markets would incessantly strive to maintain
the market integrity.
To sum up, the way forward for
securities market is to create an atmosphere
of trust in the market, confidence in the
inveslor and eciency in lhe syslem. We
need, therefore, to work towards stricter and
romler enforcemenl, sreading hnanciaI
education and upgrading technology.
51
Part Two: Trends and Operations in Securities Markets PART TWO: TRENDS AND OPERATIONS IN SECURITIES MARKETS
1. PRIMARY SECURITIES MARKET
The primary markets continued to
remain subdued in 2012-13. The muted
senlimenl is a reeclion of a combinalion of
faclors vhich incIude inler aIia, sIovdovn
in economic grovlh and consequenl sIack in
inveslmenl demand, inalionary ressures
and lhe ersislenlIy high hscaI and currenl
accounl deficils. Aelile of inveslors
conlinued lo remain Iov mirrored by
the negative returns recorded by many
IIOs Iisled in lhe revious year. IoIicy
aclions inilialed by SII, such as aIIoving
quaIihed foreign inveslors (QIIs) lo invesl
in lhe rimary as veII as secondary markels,
eIeclronic iniliaI ubIic offers (e-IIOs),
mandaling comanies lo auain lhe minimum
ubIic sharehoIding of 25 ercenl by }une
2013, inlroduclion of lhe RGISS 2012 and lhe
disinveslmenl rogramme by lhe Governmenl
is expected to reinvigorate primary market
activities.
I. Resource Mobilisation through
Public and Rights Issues
During 2012-13, 69 comanies accessed
the primary market and raised ` 32,455
crore lhrough ubIic (53) and righls issues
(16) as againsl 71 comanies vhich raised
` 48,468 crore in 2011-12 lhrough ubIic
(55) and righls issues (16) (TabIe 2.1). The
reslrained and lhe assive miIieu observed
in the primary market activities in 2011-12
conlinued furlher in 2012-13. There vere 33
IIOs during 2012-13 as againsl 34 during
2011-12. The amount raised through IPOs
during 2012-13 vas marginaIIy higher al
` 6,528 crore as comared lo ` 5,904 crore
during 2011-12. Of lhe amounl raised lhrough
IIOs, ` 1,589 crore vas lhrough oer for saIe
by exisling sharehoIders and four IIOs used
lhis mechanism lo raise resources. There vas
no IIO in lhe currenl hnanciaI year. WhiIe
lhe share of ubIic issues in lhe lolaI resource
mobiIisalion decIined lo 72.4 ercenl during
Table 2.1: Resource Mobilisation through Public and Rights Issues
2011-12 2012-13*
Percentage share in
Particulars total amount
No. of Amount No. of Amount* 2011-12 2012-13
issues (` crore) issues (` crore)
1 2 3 4 5 6 7
1. Public Issues (i)+(ii) 55 46,105 53 23,510 95.1 72.4
(i) IubIic Issues 35 10,482 33 6,528 21.6 20.1
(Equity/ PCD /FCD)
of which
IIOs 34 5,904 33 6,528 12.2 20.1
IIOs 1 4,578 0 0 9.4 0.0
(ii) IubIic Issues (Bond / NCD) 20 35,611 20 16,982 73.5 52.3
2. Rights Issues 16 2,375 16 8,945 4.9 27.6
Total Equity Issues (1(i)+2) 51 12,857 49 15,473 26.5 47.7
Total Equity and Bond (1+2) 71 48,468 69 32,455 100.0 100.0
Mcnc |icns. O[cr jcr Sa|c 5 2,054 4 1,589 4.2 4.9
Ncic. Tnc prinarq narkci rcscurcc nc|i|isaiicn is inc|usitc cj inc ancuni raisc! in inc SM| p|aijcrn.
52
2012-13 from 95.1 ercenl during 2011-12,
share of righls issues increased from 4.9
ercenl in 2011-12 lo 27.6 ercenl in 2012-13
(Charl 2.1). Of lhe ubIic issues, lhe share of
debl issues in lhe lolaI resource mobiIisalion
vas lhe Iargesl al 52.3 ercenl and lhal of
equily issues vas 47.7 ercenl in 2012-13.
A. Resource Mobilisation via SME
Platform
SII has ermiued seuing u of searale
dedicaled Ialform for lhe Iisling and lrading
of SMI securilies lo rovide an imelus lo
lhe SMI seclor. The SMI Ialform of lhe
exchange is inlended for smaII and medium
sized comanies vilh high grovlh olenliaI,
vhose osl issue aid u cailaI shaII
be Iess lhan or equaI lo ` 25 crore. Aarl
from roviding an aIlernale assel cIass lo
roseclive inveslors, lhe SMI Ialform
rovides easier access lo equily hnance for
grovlh and exansion and aIso heIs lhem
lo Iover lhe cosl of comIiance osl Iisling
Vis-a Vis Iisling on lhe main Ialform of lhe
exchanges. In lhe hrsl year of inlroduclion,
24 comanies have been Iisled in lhe SMI
Ialform raising a lolaI amounl of ` 239 crore
(TabIe 2.2).
Chart 2.1: Share of Broad Category of Issues in Resource Mobilisation
P
e
r
c
e
n
t
Table 2.2: SME Platform
Year/Month Total
No. of Amount
issue (` crore)
1 2 3
2012-13 24 239
Ar-12 0 0
May-12 1 12
}un-12 1 8
}uI-12 2 9
Aug-12 2 12
Se-12 4 36
Ocl-12 1 9
Nov-12 0 0
Dec-12 2 33
}an-13 1 11
Ieb-13 3 27
Mar-13 7 82
53
Part Two: Trends and Operations in Securities Markets
B. Sector-wise Resource Mobilisation
Seclor-vise cIassificalion reveaIs lhal
55 rivale seclor and 14 ubIic seclor
issues mobiIised resources lhrough rimary
markel during 2012-13 as comared lo 60
rivale seclor issues and 11 ubIic seclor
issues in 2011-12. The amount raised by
lhe rivale seclor issues lolaIed lo ` 17,690
crore compared to ` 14,765 crore mobiIised
by lhe ubIic seclor comanies (TabIe 2.3).
The share of rivale seclor in lolaI resource
mobiIisalion vas 54.5 ercenl in 2012-13
comared lo 29.5 ercenl in 2011-12 (Charl
2.2). The amounl raised lhrough ubIic seclor
issues vas 45.5 ercenl of lhe lolaI resource
mobiIisalion. Higher mobiIisalion by ubIic
seclor since 2009-10 vas as a resuIl of lhe
disinveslmenl rogramme oulIined by lhe
Union Governmenl. In consonance lo lhe
same in 2012-13 aIso, various ubIic seclor
enlerrises, viz., NCC, HCL, NMDC, OIL,
NTIC, RCI, NALCO and SAIL, divesled lheir
slake, vilh NTIC mobiIising lhe maximum
amount.
Table 2.3: Sector-wise Resource Mobilisation
2011-12 2012-13
Percentage share in
Sector total amount
No. of Amount No. of Amount 2011-12 2012-13
1 2 3 4 5 6 7
Irivale 60 14,293 55 17,690 29.5 54.5
IubIic 11 34,175 14 14,765 70.5 45.5
Total 71 48,468 69 32,455 100.0 100.0
Chart 2.2: Sector-wise Resource Mobilisation
7
3
.
8
9
4
.
7
7
7
.
3
1
0
0
.
0
4
5
.
9
4
3
.
5
2
9
.
5
5
4
.
5
2
6
.
2
5
.
3
2
2
.
7
0
.
0
5
4
.
1
5
6
.
5
7
0
.
5
4
5
.
5
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Private Public
54
C. Size-wise Resource Mobilisation
Issues above ` 500 crore dominaled lhe
rimary markel segmenl in 2012-13, Iike asl
years. Aboul 83.9 ercenl of lhe resource
mobiIisalion vas by lhe Iarger issues in 2012-
13 comared lo 89.7 ercenl in 2011-12(TabIe
2.4). The calegory of ` 100-500 crore sav a
rise in ils share from 7.1 ercenl in 2011-12 lo
13.6 ercenl in 2012-13.
As againsl 2011-12, lhe average issue
size of ubIic issues nearIy haIved in 2012-
13. In 2012-13, lhe mean ubIic issue size
vas ` 444 crore comared lo ` 838 crore in
2011-12. OveraII, lhe average size of an issue
(incIuding ubIic and righls) vhich accessed
lhe rimary markel decIined in 2012-13 lo
` 470 crore from ` 682 crore in 2011-12.
Hovever, lhe mean IIO size increased from
` 174 crore in 2011-12 lo ` 198 crore in
2012-13.
There vere 19 mega issues in 2012-13 as
comared lo 22 mega issues in 2011-12 (TabIe
2.5). The mega issues mobiIised ` 28,885 crore
vhich amounls lo 89.0 ercenl of ` 32,455
crore lolaI resource mobiIisalion during lhe
year.
The Iargesl issue during 2012-13 vas lhal
of lhe debl issue of Indian RaiIvays Iinance
Cororalion Lld. (` 5,373 crore) vhich vas
foIIoved by lhe equily IIO of harli InfraleI
Lld. (` 4,173 crore) and debl issue of India
Infraslruclure Iinance Comany Lld. (` 2,884
crore).
D. Industry-wise Resource Mobilisation
Induslry-vise cIassihcalion reveaIs lhal
finance comanies raised Iargesl amounl
of resources during 2012-13. The share of
16 hnance comanies vas 51.0 ercenl of
lhe lolaI resource mobiIisalion (TabIe 2.6).
TeIecommunicalion seclor vilh ils singuIar
issue garnered 12.9 ercenl of lhe lolaI
resource mobiIisalion. anks/ financiaI
inslilulions had reIaliveIy Iesser share of 7.1
ercenl in 2012-13 comared lo lhe earIier
years.
Table 2.4: Size-wise Resource Mobilisation
2011-12 2012-13
Percentage share in
Issue Size total amount
No.of Amount No. of Amount 2011-12 2012-13
1 2 3 4 5 6 7
< ` 5 crore 2 9 2 7 0.0 0.0
> ` 5 crore & < ` 10 crore 2 14 12 79 0.0 0.2
> ` 10 crore & < ` 50 crore 19 535 16 297 1.1 0.9
> ` 50 crore & < ` 100 crore 14 1,018 6 440 2.1 1.4
> ` 100 crore & < ` 500 crore 15 3,438 18 4,416 7.1 13.6
> ` 500 crore 19 43,453 15 27,216 89.7 83.9
Total 71 48,468 69 32,455 100.0 100.0
55
Table 2.5: Mega Issues in 2012-13*
Type of Type of Date of Ocr sizc Percentage
No. Name of the entity issue instrument opening (` crore) share in
of issue total
amount
1 2 3 4 5 6 7
1 a|a| Iinserv Lld. Righls Iquily 21-Se-12 940 3.3
2 Nelvork18 Media and Inveslmenls Lld. Righls Iquily 18-Se-12 2,700 9.3
3 TV18 roadcasl Lld. Righls Iquily 25-Se-12 2,699 9.3
4 Credil AnaIysis and Research Lld. IIO (OIS) Iquily 07-Dec-12 540 1.9
5 IC }eveIIer Lld. IIO Iquily 10-Dec-12 601 2.1
6 harli InfraleI Lld. IIO Iquily 11-Dec-12 4,173 14.4
(Iresh+OIS)
7 hushan SleeI Lld. Righls Iquily 22-}an-13 474 1.6
8 a|a| Iinance Lld. Righls Iquily 06-Ieb-13 744 2.6
9 AIok Induslries Lld. Righls Iquily 30-Mar-13 551 1.9
10 Shriram Transorl Iinance Comany Lld. IubIic ond 26-}uI-12 600 2.1
11 India InfoIine Iinance Lld. IubIic ond 5-Se-12 500 1.7
12 Shriram Cily Union hnance Lld. IubIic ond 12-Se-12 434 1.5
13 ReIigare Iinvesl Lld. IubIic ond 14-Se-12 332 1.1
14 RuraI IIeclrihcalion Cororalion Lld. IubIic ond 03-Dec-12 2,017 7.0
15 Iover Iinance Cororalion Lld. IubIic ond 14-Dec-12 700 2.4
16 India Infraslruclure Iinance Comany Lld. IubIic ond 26-Dec-12 2,884 10.0
17 Housing and Urban DeveIomenl IubIic ond 9-}an-13 2,194 7.6
Cororalion Lld.
18 Indian RaiIvays Iinance Cororalion Lld. IubIic ond 21-}an-13 5,373 18.6
19 Indian RaiIvays Iinance Cororalion IubIic ond 25-Ieb-13 429 1.5
Lld. - Tranche 2
Total 28,885
Mcga issucs inc|u!c issucs a|ctc ` 300 crcrc
56
Box 2.1 : Impact Analysis of policy measures introduced in Primary Market
SII has been conlinuousIy endeavoring lo increase lhe eciency of rimary markel, lo enhance lhe exibiIily lo
lhe issuers for raising cailaI and lo encourage arlicialion of relaiI inveslors in rimary markel. SeveraI measures
vere imIemenled in 2012-13, lo revive lhe subdued rimary markel miIieu and boosl inveslor conhdence. These
incIude inler-aIia, inlroduclion of e-IIOs, e-voling faciIily, minimum aIIolmenl lo relaiI inveslors, exlending reach of
ASA elc. Wilh a viev lo assess lhe imacl of lhese oIicy measures in enhancing lhe relaiI inveslor arlicialion,
SII conducled an in-house anaIysis of lhe rimary markel issuances, lhe delaiIs of vhich is summarized as foIIovs:
Participation of retail investors
Details of the study
1. Iorly-hve IIOs lhal oened during 2011-12 and 2012-13 vere anaIyzed vilh resecl lo arlicialion by relaiI
investors.
2. Iour issues vhich vere vilhdravn afler oening of lhe issue vere ignored for furlher anaIysis. Iour issues
vhich had Iarge relaiI arlicialion i.e. aIicalions received from more lhan 2 Iakhs relaiI individuaI inveslors,
vere aIso ignored for furlher anaIysis.
3. AccordingIy, 37 IIOs vere furlher anaIyzed by dividing lhem inlo 2 grous. Thirly-lhree IIOs during lhe 18
monlhs eriod from AriI 01, 2011 lo Selember 30, 2012 (re-reforms eriod) vere cIubbed in one grou and
remaining 4 IIOs during lhe 6 monlhs eriod slarling from Oclober 01, 2012 lo March 31, 2013 (osl-reforms
eriod) vere cIubbed in anolher grou.
4. Iour issues vilh Iarge relaiI arlicialion vere sludied searaleIy.
Results of the study
1. ased on lhe subscrilion dala of 45 IIOs, il vas observed lhal lhe average number of relaiI inveslors aIying
er issue increased from 37,626 (re-reforms) lo 1,16,907 (osl-reforms).
2. ased on furlher anaIysis of 37 IIOs, lhe foIIoving has been observed:
i. Average number of relaiI inveslors aIying er issue in lhe osl-reforms eriod increased lo around 10
times.
ii. Average subscrilion in relaiI calegory er issue has increased from ` 70.70 crore lo ` 190.3 crore.
iii. 97% of lhe relaiI aIicanls have been aIIoued shares in lhe osl-reforms eriod.
3. In case of lhe 4 issues vilh Iarge arlicialion, average number of relaiI inveslors aIying er issue increased
from 2.58 Iakhs lo 3.26 Iakhs.
Impact of other policy measures
The faciIily lo rocure IIO form and submil il, is nov avaiIabIe lo inveslors in more lhan 1000 Iocalions on
accounl of SII circuIar on use of slock broker nelvork of Slock Ixchanges for submiuing aIicalions in
ubIic issuances.
Inveslors are nov direclIy abIe lo submil ASA aIicalions in more lhan 67,000 bank branches as againsl Iess
lhan 10,000 branches lhal exisled before lhe issue of circuIar daled Selember 25, 2012.
Comanies are using QII discounl eecliveIy lo make aIIolmenl lo inslilulionaI inveslors even during
depressed market conditions.
On accounl of slreamIining of rocess and various exlernaI faclors, lhe average lime laken by SII for
rocessing oer documenls has decreased from 152 days lo 48 days.
57
II. Resource Mobilisation through QIP
and IPP
A. QIP and IPP
In addilion lo lhe ubIic and righls
issues, quaIihed inslilulions' Iacemenl (QII)
is anolher mechanism vhich vas inlroduced
to minimize the excessive dependence
on foreign markels. QII is avaiIabIe for
issuing of equily shares, non-converlibIe
debl inslrumenls aIong vilh varranls and
converlibIe securilies olher lhan varranls,
lo QuaIihed InslilulionaI uyers (QIs). On
lhe olher hand, III roule vas inlroduced by
SII under Chaler VIII-A of SII (ICDR)
ReguIalions, 2009 during lhe hnanciaI year
2011-12, as an addilionaI melhod for lhe
Iisled comanies lo achieve minimum ubIic
sharehoIding requiremenl.
III roule aIies lo issuance of fresh
shares and/or oer for saIe of shares in a
Iisled issue. Il has been rescribed lhal lhis
can be imIemenled by vay of fresh issue of
cailaI by such comanies. Under Chaler
VIII-A of lhe ICDR ReguIalions, any oer,
aIIocalion and aIIolmenl of securilies under
lhe III roule shaII be made onIy lo QIs.
During 2012-13, 45 issues lhrough QII
and III roule garnered a lolaI amounl of
` 15,996 crore, vhich vas 639.6 ercenl
higher than ` 2,163 crore raised in 2011-12.
Table 2.6: Industry-wise Resource Mobilisation
2011-12 2012-13 Percentage share in
Industry total amount
No. of Amount No. of Amount 2011-12 2012-13
1 2 3 4 5 6 7
anks/IIs 11 20,503 7 2,475 42.3 7.6
Cemenl & Conslruclion 2 187 1 9 0.4 0.0
ChemicaI 0 0 1 9 0.0 0.0
IIeclronics 1 121 0 0 0.2 0.0
Ingineering 1 217 2 74 0.4 0.2
Inlerlainmenl 1 89 1 12 0.2 0.0
Iinance 18 12,816 16 16,536 26.4 51.0
Iood Irocessing 0 0 2 19 0.0 0.1
HeaIlhcare 1 65 2 210 0.1 0.6
Informalion TechnoIogy 2 138 1 4 0.3 0.0
Iaer & IuI 2 306 0 0 0.6 0.0
IIaslic 1 11 0 0 0.0 0.0
Iover 0 0 0 0 0.0 0.0
Irinling 2 71 0 0 0.1 0.0
TeIecom 0 0 1 4,173 0.0 12.9
TexliIe 0 0 4 582 0.0 1.8
MisceIIaneous 29 13,943 31 8,352 28.8 25.73
Total 71 48,468 69 32,455 100.0 100.0
58
There vere lhree III issues in }uIy 2012,
Selember 2012 and }anuary 2013. The lolaI
amounl raised lhrough lhe III issues vas
` 941 crore in 2012-13 comared lo one III
issue vhich raised ` 471 crore in 2011-12
(TabIe 2.7).
B. Ocr Inr 5a!c thrnugh 5tnck Exchangc
Mechanism
Yel anolher mechanism made avaiIabIe
for comani es lo comI y vi lh MIS
requiremenl is lhe oer for saIe lhrough slock
exchange mechanism vhich vas inlroduced
in Iebruary 2012. Il is lhe more oflen used
mechanism comared lo III. AccordingIy,
in 2011-12, lvo comanies had used lhis
roule lhrough SI and NSI lo conform lo
lhe ubIic sharehoIding norms (TabIe 2.8).
In 2012-13, 33 comanies offIoaded lheir
shares using lhe oer for saIe lhrough slock
exchanges.
III. Resource Mobilisation through
Preferential Allotment
Under lhe referenliaI aIIolmenl, a
Iisled comany issues equily shares / fuIIy
converlibIe debenlures/arlIy converlibIe
debenlures or any olher hnanciaI inslrumenls
vhich vouId be converled inlo or exchanged
vilh equily shares al a Ialer dale. The
aIIolmenls are done on rivale Iacemenl
basis lo seIecl grou of ersons under
seclion 81 (1A) of Comanies Acl, 1956. The
issuer is required lo lake lhe ermission
of sharehoIders and shouId comIy vilh
various rovisions vhich inler-aIia incIude
Table 2.7: Resource Mobilisation through QIP and Conforming to MPS through IPP
Year/Month
NSE BSE Common Total
No. of Amount No. of Amount No. of Amount No. of Amount
issues (` crore) issues (` crore) issues (` crore) issues (` crore)
1 2 3 4 5 6 7 8 9
2010-11 10 2,802 3 90 46 22,959 59 25,850
2011-12 1 8 1 40 14 2,114 16 2,163
2012-13 1 950 1 160 43 14,885 45 15,996
Ar-12 0 0 0 0 2 25 2 25
May-12 0 0 0 0 2 1 2 1
}un-12 0 0 0 0 3 518 3 518
}uI-12 0 0 0 0 8 1,898 8 1,898
Aug-12 0 0 0 0 12 2,211 12 2,211
Se-12 0 0 0 0 6 1,034 6 1,034
Oct-12 0 0 0 0 0 0 0 0
Nov-12 0 0 0 0 2 1,042 2 1,042
Dec-12 0 0 0 0 3 2,118 3 2,118
}an-13 0 0 0 0 1 364 1 364
Ieb-13 0 0 0 0 4 5,676 4 5,676
Mar-13 1 950 1 160 0 0 2 1,110
Scurcc. BS|, NS|
Tab!c 2.8: Ocr Inr 5a!c thrnugh 5tnck
Exchange Mechanism to conform to MPS
Year No. of Companies
1 2
2011-12 2
2012-13 33
Scurcc. BS|, NS|
59
ricing, discIosures in lhe nolice, Iock-in, elc,
in addilion lo lhe requiremenls secihed in
lhe Comanies Acl, 1956. During 2012-13,
420 referenliaI issues raised ` 46,939 crore
comared lo 311 referenliaI issues vhich
raised ` 25,709 crore in 2011-12 (TabIe 2.9).
IV. Resource Mobilisation through
Private Placement of Corporate Debt
The rivale Iacemenl of cororale
bonds has grovn as lhe referred roule for
raising debt money by the corporate entities.
As resenled in lhe labIe 2.10 aboul 2,489
Table 2.9: Resource Mobilisation through Preferential Allotment
Year/ Month
1 2 3 4 5 6 7 8 9
2010-11 83 1,393 156 12,072 134 17,046 373 30,511
2011-12 133 2,820 88 4,166 90 18,723 311 25,709
2012-13 188 7,442 87 12,729 145 26,768 420 46,939
Ar-12 1 2 2 97 18 10,166 21 10,265
May-12 13 2,809 21 8,508 10 3,670 44 14,987
}un-12 31 2,144 5 2,303 13 2,382 49 6,830
}uI-12 23 373 9 362 13 1,248 45 1,982
Aug-12 25 819 4 394 11 1,106 40 2,320
Se-12 17 278 6 263 12 393 35 933
Ocl-12 19 101 3 175 7 604 29 880
Nov-12 16 274 4 151 14 892 34 1,317
Dec-12 22 397 1 2 15 1,259 38 1,659
}an-13 9 93 4 96 10 690 23 879
Ieb-13 11 139 4 161 9 1,590 24 1,891
Mar-13 1 13 24 217 13 2,767 38 2,998
Scurcc. BS|, NS|
Table 2.10: Private Placement of Corporate Bonds Reported to BSE and NSE
Year/ Month
1 2 3 4 5 6 7 8 9
2008-09 699 1,24,810 285 17,045 57 31,426 1,041 1,73,281
2009-10 647 1,43,286 597 49,739 34 19,610 1,278 2,12,635
2010-11 774 1,53,370 591 52,591 39 12,825 1,404 2,18,785
2011-12 1,152 1,89,803 783 56,974 18 14,505 1,953 2,61,283
2012-13 1,295 2,06,187 1,094 72,474 100 82,801 2,489 3,61,462
Ar-12 79 17,050 61 3,875 5 2,590 145 23,515
May-12 94 13,528 58 6,865 6 3,600 158 23,993
}un-12 241 18,258 26 1,882 6 6,110 273 26,250
}uI-12 137 28,873 55 10,188 10 18,685 202 57,745
Aug-12 94 18,558 81 6,967 11 9,367 186 34,892
Se-12 50 7,965 66 3,414 6 3,040 122 14,420
Ocl-12 100 18,357 90 4,556 12 7,580 202 30,493
Nov-12 113 13,666 207 8,441 5 3,989 325 26,096
Dec-12 54 11,477 113 8,700 9 6,062 176 26,239
}an-13 111 23,339 143 8,478 5 7,207 259 39,025
Ieb-13 132 11,763 100 3,711 8 4,150 240 19,624
Mar-13 90 23,353 94 5,395 17 10,422 201 39,170
Scurcc. BS|, NS|
60
issues vere made and a lolaI of ` 3,61,462
crore vas raised lhrough rivale Iacemenl
during 2012-13 vhich is 38.3 ercenl higher
compared to ` 2,61,283 crore in 2011-12.
The subslanliaI amounl raised as veII as
lhe grovlh in lhe amounl raised lhrough
rivale Iacemenl shovs lhe reference for
rivale Iacemenl as lhe mode of fund raising
mechanism.
2. SECONDARY SECURITIES
MARKET
I. Equity Markets in India
During 2012-13, Indian equily markels
slaged a sIov recovery foIIoved by signihcanl
lurnaround amidsl slrong headvinds caused
due lo slrains in gIobaI hnanciaI markels
couIed vilh Iingering domeslic economic
voes. Markels recovered in lhe backdro of
slrong revilaIizing oIicy announcemenls and
reforms vhich induced inveslor olimism and
energized lhe inveslmenl miIieu. The much
needed Iiquidily for lhe markels vas deIivered
by lhe enhanced cailaI ovs lo emerging
markels incIuding India from deveIoed
markels in search of higher relurns.
NeverlheIess, unreIenling damening
faclors osed uncerlainly in lhe form of
dovngrade of India's Iong lerm raling oulIook
lo negalive from slabIe, ruee derecialion,
Iov grovlh, and eIevaled concerns on lhe hscaI
and currenl accounl dehcils. Iven lhough
infIalion slarled easing, RI's lighlening
monelary slance conlinued. In sile of lhe
macroeconomic slress, inveslor conhdence
and markel senlimenl remained hrm on lhe
execlalions of furlher imrovemenls in lhe
domestic economic scenario.
In lhe beginning of lhe hnanciaI year,
in lhe hrsl quarler, equily markels decIined
in lhe backdro of veak economic and
inveslmenl cIimale, ruee derecialion and
heightened concerns on fiscaI deficil and
currenl accounl deficil. The III segmenl
vilnessed nel oulovs in lhe hrsl quarler.
The second quarler sav a modesl recovery
boosled by III inovs and moderalion of
economic indicalors Iike derecialion. The
lhird quarler sav a ick-u in markels aided
by suslained III inovs and imrovemenls in
lhe oIicy aclions in lhe domeslic scene Iike
various reforms announced by Governmenl
of India and SII. IoIicy aclions in lhe gIobaI
fronl aIso augured veII for lhe financiaI
markels Iike euro area oIicy aclion and
hscaI cIi agreemenl and monelary easing
by advanced economies. The BSE Sensex
and CNX Nifly crossed lhe 20000 and 6000
mark, resecliveIy afler lvo years in }anuary
2013. Conlinued eorls lo reduce lhe risks
confronling lhe gIobaI economy conlribuled
furlher in markel consoIidalion and revivaI in
lhe fourlh quarler. Hovever, lovards lhe end
of lhe fourlh quarler domeslic equily markels
veakened on accounl of Iover grovlh,
uncerlainly in oIilicaI cIimale and sIuggish
corporate earnings.
During 2012-13, lhe SI Sensex and
CNX Nifly arecialed by 8.2 ercenl and
7.3 ercenl, resecliveIy, over March 30, 2012
(Charl 2.3). The SI Sensex gained by 1432
oinls lo cIose al 18836 on March 29, 2013
comared lo 17404 on March 30, 2012. The
CNX Nifly aIso increased 387 oinls lo cIose
al 5683 al lhe end of March 2013 over 5296 al
lhe end of March 2012.
SI Sensex and CNX Nifly reached lheir
maximum on }anuary 29, 2013, vhen lhe
indices louched lhe IeveIs of 20204 and 6112
resecliveIy. The Iovesl IeveI for lhe hnanciaI
year vas reached on }une 4, 2012 vhen SI
Sensex and CNX Nifly louched 15749 and
4770, resecliveIy. The highesl gain in SI
Sensex and CNX Nifly vas observed on }une
6, 2012 vhen bolh indices arecialed by 2.7
61
ercenl resecliveIy. The highesl faII of 2.2
ercenl vas recorded on May 8, 2012 for lhe
hnanciaI year.
In lhe cash segmenl, lhe lurnover al
SI and NSI decIined by 17.8 ercenl and
3.7 ercenl resecliveIy during 2012-13 as
comared lo a faII of 39.6 ercenl and 21.4
ercenl, resecliveIy during 2011-12 (TabIe
2.11). Hovever, in lhe derivalive segmenl, lhe
overaII equily derivalive segmenl shoved a
surge in lurnover lo lhe exlenl of 20.3 ercenl
in 2012-13.
The inslrumenl-vise comosilion of
lhe vaIue lraded in lhe secondary markel is
shovn in Charl 2.4. In lhe Indian secondary
markel, in lerms of lraded lurnover, lhe
equily derivalive Iead vilh a dominanl share
of 76 ercenl foIIoved by currency derivalives
Chart 2.3: Movements of Benchmark Stock Indices
0
1000
2000
3000
4000
5000
6000
7000
0
5000
10000
15000
20000
25000
A
p
r
-
1
2
M
a
y
-
1
2
J
u
n
-
1
2
J
u
l
-
1
2
A
u
g
-
1
2
S
e
p
-
1
2
O
c
t
-
1
2
N
o
v
-
1
2
D
e
c
-
1
2
J
a
n
-
1
3
F
e
b
-
1
3
M
a
r
-
1
3
S
&
P
C
N
X

N
i
f
t
y
B
S
E
S
e
n
s
e
x
Sensex Nifty
62
Table 2.11: Major Indicators of Indian Stock Markets
Percentage Variation over the
Item 2011-12 2012-13 Previous Year
2011-12 2012-13
1 2 3 4 5
A. Indices
BSE Sensex
Year-end 17404 18836 -10.5 8.2
Average 17423 18202 -6.4 4.5
CNX Nifly
Year-end 5296 5683 -9.2 7.3
Average 5243 5520 -6.1 5.3
CNX 500
Year-end 4222 4438 -8.7 5.1
Average 4186 4377 -8.6 4.6
B. Annualised Volatility (percent)
SI Sensex 20.2 12.5
CNX Nifly 20.4 12.9
C. Total Turnover (`crnrc)
Cash Segmenl (AII-India) 34,84,381 32,61,701 -25.6 -6.4
of which
SI 6,67,498 5,48,774 -39.6 -17.8
NSI 28,10,892 27,08,279 -21.4 -3.7
Iquily Derivalives Segmenl 3,21,58,208 3,87,12,621 9.9 20.4
of which
SI 8,08,476 71,63,519 786.1
NSI 3,13,49,732 3,15,33,004 7.2 0.6
D. Market Capitalisation (`crnrc)
SI 62,14,941 63,87,887 -9.1 2.8
NSI 60,96,518 62,39,035 -9.0 2.3
E. No. of Listed Companies
SI 5,133 5,211 1.3 1.5
NSI 1,646 1,666 4.6 1.2
E. P/E Ratio
SI Sensex 17.8 16.9
CNX Nifly 18.7 17.6
CNX 500 18.3 17.1
Ncics. 1. A|| |n!ia casn scgncni iurnctcr inc|u!cs BS|, NS|, CS| an! MCX-SX.
2. Ocritaiitc Scgncni iurnctcr inc|usitc cj iurnctcr in MCX-SX.
3. in!icaics cxpcncniia| risc in iurnctcr !uc ic |cucr |asc.
Scurcc. BS|, NS|
(17 ercenl), cash segmenl (six ercenl) and
cororale bonds (one ercenl).
The markel cailaIisalion al SI and
NSI aIso indicaled an ulurn as il increased
by 2.8 ercenl and 2.3 ercenl resecliveIy.
There vas moderalion in I/I ralios over lhe
asl year, and Indian markels are reasonabIy
priced compared to emerging and other
deveIoed markels. The lurnaround in
Indian markels can arlIy be auribuled lo
lhe conlinuous foreign inslilulionaI inovs.
VoIaliIily, measured by annuaIized slandard
devialion, decIined subslanliaIIy in 2012-13
compared to the previous year.
63
The gIobaI financiaI markels vere
increasingIy fragiIe during lhe hrsl haIf of
hnanciaI year. The rinciaI source of gIobaI
laiI risk vas lhe unfoIding euro area crisis
vhich romled safe haven ovs lo olher
counlries, incIuding US, }aan and emerging
markel counlries. TaiI risks aIso emanaled
from lhe Iarge hscaI chaIIenges and imbaIance
faced by USA and }aan. GIobaIIy many nev
inslrumenls have emerged lo salisfy inveslor
demand and lackIing exlreme laiI risks.
Instruments such as Exchange Traded Notes
(ITNs) on VIX and olher voIaliIily-based
roducls are roughIy 40 ercenl of Iisled
S&I 500 olions. Iven lhough emerging
markel economies vere resiIienl in lhe vake
of gIobaI shocks, veak economic rosecls
and delerioraling gIobaI economic condilions
resenled lhem vilh fresh chaIIenges in
lhe equily and currency markels. Hovever,
conlinued orlfoIio inovs inlo emerging
markels reinforced lhe confidence on
emerging markels as safe havens.
The second haIf of lhe hnanciaI year
sav easing of lensions and remarkabIe
imrovemenls in lhe gIobaI financiaI
condilions cuIminaling in a raIIy in equily
rices. IoIicy aclions vhich incIuded Iiquidily
suorl, easing of monelary and hnanciaI
oIicies Ienl adequale suorl for recovery
of markels. The resoIulion of fiscaI cIiff
and oslonemenl of debl ceiIing deadIine
boosled lhe gIobaI markel senlimenls. Neilher
lhe oIilicaI uncerlainly in Iuroe nor lhe
evenls in Cyrus signihcanlIy aecled lhe
hnanciaI markels. Mosl of lhe emerging and
deveIoed markels vilnessed graduaI ulurn
during 2012-13. Among lhe emerging markels
lhe annuaI relurn on a oinl-lo-oinl basis
vas lhe highesl in ThaiIand (30.4 ercenl),
foIIoved by Argenlina (27.5 ercenl) and
Indonesia (19.9 ercenl). (Charl 2.5)
64
Among lhe deveIoed equily markels,
lhe yearIy relurns vere highesl in }aan (23.0
ercenl) foIIoved by AuslraIia (12.7 ercenl)
and Germany (12.2 ercenl). The decIines
vere lhe maximum for raziI (12.6 ercenl),
Russia (10.6 ercenl) and CoIombia (6.0
ercenl).
II. Performance of Major Stock
Indices and Sectoral Indices
AIlhough lhere vas an ulurn in lhe
benchmark indices, lhe lrend vas mixed for
secloraI and olher broad markel indices. The
secloraI and olher indices lrends are shovn
in TabIes 2.12 and 2.13 and Charls 2.6 and
2.7. Among lhe broad-based SI indices, SI
100, SI 200 and SI 500 recorded grovlh
of 6.8 ercenl, 6.0 ercenl and 4.8 ercenl
resecliveIy over lhe revious year. The SI
SmaII-ca index recorded a decIine of 12.4
ercenl during 2012-13. SimiIarIy, among lhe
NSI indices, vhiIe lhe CNX 500 and CNX
Nifly }unior imroved by 5.1 ercenl and 7.4
ercenl resecliveIy in 2012-13, lhe CNX Mid-
ca decIined by 4.0 ercenl.
Mixed lrend revaiIed in lhe relurn
generaled by secloraI indices. The highesl
increase among secloraI indices during
2012-13 vas recorded by SI IMCG index
(31.7 ercenl) foIIoved by SI HeaIlhcare
index (20.9 ercenl) and SI IT index (13.2
ercenl). Among lhe secloraI indices of SI,
decIine vas lhe highesl for SI MelaI index
(22.8 ercenl), foIIoved by SI Iover index
(21.3 ercenl), SI ISU index (11.3 ercenl)
(Charl 2.6).
In NSI, among lhe secloraI indices
highesl grovlh vas regislered in CNX
IMCG index (33.9 ercenl), foIIoved by CNX
IelrochemicaIs (20.6 ercenl), CNX Iharma
(15.4 ercenl) and CNX Iinance (12.9 ercenl)
(Charl 2.7).
Table 2.12: Major Stock Indices and their Percentage Variation
Year/ BSE Percentage BSE Percentage CNX Percentage CNX Percentage CNX Percentage
Month Sensex Variation 100 Variation Nifty Variation Mid-cap Variation 500 Variation
1 2 3 4 5 6 7 8 9 10 11
2008-09 9709 -37.9 2867 -40.0 3021 -36.2 3408 -45.4 2295 -40.0
2009-10 17528 80.5 5394 88.2 5249 73.8 7705 126.1 4313 87.9
2010-11 19445 10.9 5856 8.6 5834 11.1 8040 4.3 4626 7.3
2011-12 17404 -10.5 5315 -9.2 5296 -9.2 7711 -4.1 4222 -4.1
2012-13 18836 8.2 5679 6.8 5683 7.3 7402 -4.0 4438 5.1
Ar-12 17319 -0.5 5268 -0.9 5248 -0.9 7471 -3.1 4178 -1.0
May-12 16219 -6.4 4942 -6.2 4924 -6.2 6898 -7.7 3913 -6.3
}un-12 17430 7.5 5279 6.8 5279 7.2 7352 6.6 4171 6.6
}uI-12 17236 -1.1 5229 -0.9 5229 -0.9 7169 -2.5 4126 -1.1
Aug-12 17430 1.1 5251 0.4 5259 0.6 7066 -1.4 4130 0.1
Se-12 18763 7.6 5701 8.6 5703 8.5 7841 11.0 4504 9.1
Ocl-12 18505 -1.4 5621 -1.4 5620 -1.5 7763 -1.0 4449 -1.2
Nov-12 19340 4.5 5909 5.1 5880 4.6 8140 4.9 4675 5.1
Dec-12 19427 0.4 5976 1.1 5905 0.4 8505 4.5 4743 1.5
}an-13 19895 2.4 6091 1.9 6035 2.2 8364 -1.7 4795 1.1
Ieb-13 18862 -5.2 5720 -6.1 5693 -5.7 7540 -9.8 4478 -6.6
Mar-13 18836 -0.1 5679 -0.7 5683 -0.2 7402 -1.8 4438 -0.9
Scurcc. BS|, NS|
65
Table 2.13: Sectoral Stock Indices and their Returns
Year/ CNX Percentage CNX Percentage CNX Percentage BSE Oil Percentage BSE Percentage
Month IT Variation Bank Variation PSE Variation and Gas Variation FMCG Variation
1 2 3 4 5 6 7 8 9 10 11
2008-09 2319 -55.3 4133 -22.2 2454 -1.2 7053 9.9 2036 17.1
2009-10 5856 152.6 9460 128.9 3766 53.5 10159 44.0 2831 39.1
2010-11 7148 22.1 11705 23.7 3567 -5.3 10241 0.8 3596 27.0
2011-12 6516 -8.8 10213 -12.8 2900 -18.7 8088 -21.0 4493 24.9
2012-13 7219 10.8 11362 11.3 2748 -5.2 8327 3.0 5919 3.0
Ar-12 6085 -6.6 10277 0.6 2839 -2.1 7965 -1.5 4772 6.2
May-12 6009 -1.3 9441 -8.1 2660 -6.3 7588 -4.7 4574 -4.7
}un-12 6145 2.3 10341 9.5 2907 9.3 8076 6.4 4992 6.4
}uI-12 5695 -7.3 10384 0.4 2901 -0.2 8158 1.0 5046 1.0
Aug-12 6072 6.6 9991 -3.8 2842 -2.0 8212 0.7 5356 0.7
Se-12 6314 4.0 11457 14.7 2972 4.6 8662 5.5 5507 5.5
Ocl-12 6088 -3.6 11269 -1.6 2851 -4.1 8355 -3.5 5687 -3.5
Nov-12 6263 2.9 12159 7.9 2876 0.9 8252 -1.2 6038 -1.2
Dec-12 6025 -3.8 12474 2.6 2891 0.5 8519 3.2 5916 3.2
}an-13 6778 12.5 12709 1.9 3094 7.0 9359 9.9 5922 9.9
Ieb-13 7107 4.8 11487 -9.6 2853 -7.8 8648 -7.6 5669 -7.6
Mar-13 7219 1.6 11362 -1.1 2748 -3.7 8327 -3.7 5919 -3.7
Scurcc. BS|, NS|
66
III. Turnover in Indian Stock Market
Nolvilhslanding lhe sleady ick u
in equily rices, lhere vas a faII in lhe
lrading voIumes in cash segmenl in 2012-
13. The lurnover of aII slock exchanges in
lhe cash segmenl decIined by 6.4 ercenl lo
` 32,61,701 crore in 2012-13 from ` 34,84,381
crore in 2011-12 (TabIe 2.14). SI and NSI
Table 2.14: Exchange-wise Cash Segment Turnover
(` crcrc)
Stock Exchange 2010-11 2011-12 2012-13 Percentage Share
1 2 3 3 4
Recognized Stock Exchanges
Ahmedabad NiI NiI NiI NiI
SI 11,05,027 6,67,498 5,48,774 16.8
angaIore NiI NiI NiI NiI
hubanesvar NiI NiI NiI NiI
Cochin NiI NiI NiI NiI
Coimbalore NiI NiI NiI NiI
DeIhi NiI NiI NiI NiI
Gauhali NiI NiI NiI NiI
ISI NiI NiI NiI NiI
}aiur NiI NiI NiI NiI
CaIcuua 2,597 5,991 4,614 0.1
Ludhiana NiI NiI NiI NiI
Madras NiI NiI NiI NiI
MCX 33 0.0
MISI NiI NiI NiI NiI
NSI 35,77,410 28,10,892 27,08,279 83.0
OTCII NiI NiI NiI NiI
Iune NiI NiI NiI NiI
UISI 0.12 NiI NiI NiI
Vadodara NiI NiI NiI NiI
Total 46,85,034 34,84,381 32,61,701 100.00
Scurcc. Varicus Sicck |xcnangcs
67
together conlribuled 99.8 ercenl of lhe
lurnover, of vhich NSI accounled for 83.0
ercenl in lhe lolaI lurnover in cash markel
vhereas SI accounled for 16.8 ercenl lo
lhe lolaI. Aarl from NSI and SI, lhe onIy
slock exchanges vhich recorded lurnover
during 2012-13 vas CaIcuua Slock Ixchange
and MCX-SX. The nev slock exchange, MCX-
SX slarled ils oeralions in lhe cash segmenl
on Iebruary 11, 2013.There vas hardIy any
transaction on other stock exchanges. The
lurnover al SI and NSI decIined by 17.8
ercenl and 3.7 ercenl, resecliveIy in
2012-13 over lhe revious year. Monlh-vise,
BSE and NSE together recorded the highest
lurnover in }anuary 2013 foIIoved by Oclober
2012 and December 2012 (TabIe 2.15).
Widening lhe geograhicaI reach of
cailaI markels is one of lhe imorlanl asecl
of deveIomenl of securilies markels in
India (TabIe 2.16). On-Iine lrading faciIilies,
demaleriaIised securilies and eIeclronic IIO
aIicalion syslem are a fev of lhe fealures
lhal calaIyse lhe enelralion of equily
inveslmenl cuIlure inlo lhe farlhesl corners
of a diverse nalion Iike India. Aboul 61.7
ercenl of lhe lolaI lurnover of NSI and 51.7
ercenl of SI vas concenlraled in Mumbai
and Thane, lhe hnanciaI hub of lhe counlry.
Al NSI, DeIhi/Ghaziabad conlribuled 8.0
ercenl and CaIcuua /Hovrah accounled for
7.7 ercenl of lhe lurnover. On lhe olher hand
al SI, Ahmedabad and KoIkala accounled
8.0 ercenl and 6.3 ercenl resecliveIy. The
lo hve cilies accounled for 86.3 ercenl of
Table 2.15: Turnover at BSE and NSE: Cash Segment
BSE NSE
Total
Year / Month Turnover Percentage Turnover Percentage
Turnover
(` crore) Variation (` crore) Variation
(` crore)
1 2 3 4 5 6
2008-09 11,00,074 -30.3 27,52,023 -22.5 38,52,097
2009-10 13,78,809 25.3 41,38,023 50.4 55,16,833
2010-11 11,05,027 -19.9 35,77,410 -13.5 46,82,437
2011-12 6,67,498 -39.6 28,10,893 -21.4 34,78,390
2012-13 5,48,774 -17.8 27,08,279 -3.7 32,57,054
Ar-12 42,305 -32.5 1,98,324 -27.2 2,40,630
May-12 41,655 -1.5 2,16,755 9.3 2,58,409
}un-12 44,315 6.4 2,02,104 -6.8 2,46,418
}uI-12 44,475 0.4 2,10,325 4.1 2,54,800
Aug-12 42,789 -3.8 2,04,874 -2.6 2,47,663
Se-12 45,501 6.3 2,40,189 17.2 2,85,690
Ocl-12 51,030 12.2 2,39,795 -0.2 2,90,825
Nov-12 47,783 -6.4 2,20,933 -7.9 2,68,716
Dec-12 50,377 5.4 2,40,325 8.8 2,90,702
}an-13 56,662 12.5 2,95,415 22.9 3,52,077
Ieb-13 42,138 -25.6 2,26,642 -23.3 2,68,780
Mar-13 39,745 -5.7 2,12,598 -6.2 2,52,343
Source: SI, NSI
68
turnover at NSE during 2012-13 compared to
85.2 ercenl in 2011-12. Al SI, 74.6 ercenl
of lurnover is conlribuled by lo hve cilies
during 2012-13.
IV. Market Capitalisation
Markel cailaIisalion is a ma|or indicalor
lhal indicales size of lhe slock markel. A
higher markel cailaIisalion reecls groving
slock markel aclivilies and an uvard lrend
in slock markels. The markel cailaIisalion
of SI has been higher lhan lhal of NSI
in India reecling Iarge number of shares
being Iisled in SI. As menlioned earIier,
lhe markel cailaIisalion of SI rose by 2.8
percent to ` 63,87,887 crore in 2012-13 from
` 62,14,941 crore in 2011-12 (TabIe 2.17). On
lhe olher hand, al NSI markel cailaIisalion
Table 2.16: City-wise Turnover of Top 20 Cities in Cash Segment during 2012-13
BSE NSE
Percentage Percentage
City Turnover Share in City Turnover Share in
(` crore) Cash (` crore) Cash
Turnover Turnover
1 2 3 4 5 6
Mumbai 2,83,517 51.7 Mumbai / Thane 16,71,137 61.7
Ahmedabad 43,699 8.0 DeIhi/Ghaziabad 2,17,587 8.0
KoIkala 34,759 6.3 CaIcuua / Hovrah 2,08,229 7.7
Nev DeIhi 25,214 4.6 Ahmedabad 1,26,957 4.7
Ra|kol 21,967 4.0 Ghaziabad/Noida/ 1,13,182 4.2
Sahibabad
Sural 5,975 1.1 Hyderabad/Secunderabad/ 82,394 3.0
KukalaIIy
Ghaziabad+Dadri 5,355 1.0 Cochin/IrnakuIam/Iarur/ 41,733 1.5
KaIamserry/AIvaye
}aiur 5,052 0.9 Chennai 39,045 1.4
Vadodara 4,254 0.8 Ra|kol 31,279 1.2
Kanur 3,921 0.7 Gurgaon 24,531 0.9
}odhur 3,140 0.6 Chandigarh/MohaIi/ 13,760 0.5
IanchkuIa
Iune 3,084 0.6 aroda 11,640 0.4
Chennai 2,859 0.5 Indore 11,412 0.4
Indore 2,188 0.4 angaIore 10,516 0.4
Hyderabad 1,861 0.3 }aiur 9,904 0.4
havnagar 1,819 0.3 Sural 9,489 0.4
anguIuru 1,782 0.3 }odhur 6,080 0.2
Girva 1,765 0.3 Iaridabad 5,863 0.2
Nagur 1,575 0.3 ahadurgarh 5,745 0.2
}amnagar 1,429 0.3 Ghaziabad 5,575 0.2
Total 4,55,212 83.0 26,46,056 97.7
Scurcc. BS|, NS|
69
increased by 2.3 percent to ` 62,39,035 crore
in 2012-13 from ` 60,96,518 crore in 2011-12.
In Iine vilh lhe generaI ulrend and osilive
senlimenl, lhe markel cailaIisalion of SI
aIso sav an increase in aImosl haIf of lhe
year. The grovlh vas slrongesl in Selember
2012 and conlinuous lovards lhe end of lhird
and beginning of fourlh quarler. Tovards lhe
end of lhe hnanciaI year, hovever, lhe markel
cailaIisalion vilnessed decIine. SimiIar
lrends vere seen in NSI markel cailaIisalion
aIso.
In SI, lhe markel cailaIisalion of lhe
Sensex scris arecialed subslanliaIIy by
10.1 ercenl in 2012-13. WhiIe markel ca
of SI Teck and ankex increased by 13.1
ercenl and 12.7 ercenl, lhal of SI ISU
decIined by 10.3 ercenl in 2012-13 over lhe
revious hnanciaI year.
Markel cailaIisalion of lhe shares
incIuded in CNX Nifly increased by 11.7
ercenl during lhe hnanciaI year. The rise in
lhe markel cailaIisalion of lhe Nifly scris
vas more lhan lhal of exchange markel
cailaIisalion (TabIe 2.18). Ixcel CNX
Midca, lhe markel cailaIisalion increased
for lhe indices anaIysed for NSI in 2012-13
compared to the previous year. The market
cailaIisalion of CNX Midca decIined by
10.7 ercenl in 2012-13 over lhe revious year.
Al NSI, among secloraI indices anaIysed, rise
in markel cailaIisalion vas lhe highesl for
CNX ank (16.7 ercenl) foIIoved by CNX IT
(15.3 ercenl).
Table 2.17: Market Capitalisation at BSE
(` crcrc)
Year/ All Listed Percentage BSE Percentage BSE- Percentage Bankex Percentage BSE Percentage
Month Companies Variation Sensex Variation Teck Variation Variation PSU Variation
1 2 3 4 5 6 7 8 9 10 11
2008-09 30,86,075 -39.9 15,07,742 -32.2 4,10,923 -39.7 2,33,895 -38.0 9,49,211 -17.7
2009-10 61,65,619 99.8 26,17,900 73.6 7,40,817 80.3 5,54,127 136.9 17,33,662 82.6
2010-11 68,39,084 10.9 29,44,451 12.5 8,69,794 17.4 6,89,751 24.5 19,48,555 12.4
2011-12 62,14,941 -9.1 14,59,141 -50.4 3,45,958 -60.2 3,90,614 -43.4 16,03,085 -17.7
2012-13 63,87,887 2.8 16,07,224 10.1 3,91,259 13.1 4,40,395 12.7 14,38,155 -10.3
Ar-12 61,75,377 -0.6 14,52,345 -0.5 3,23,035 -6.6 3,93,239 0.7 15,89,378 -0.9
May-12 58,17,422 -5.8 13,60,993 -6.3 3,18,253 -1.5 3,60,162 -8.4 14,96,012 -5.9
}un-12 61,52,309 5.8 14,75,914 8.4 3,25,428 2.3 3,95,002 9.7 16,10,540 7.7
}uI-12 60,76,541 -1.2 14,60,555 -1.0 3,07,745 -5.4 3,95,616 0.2 15,76,580 -2.1
Aug-12 60,80,798 0.1 14,76,592 1.1 3,16,368 2.8 3,81,992 -3.4 15,39,831 -2.3
Se-12 65,59,050 7.9 15,92,339 7.8 3,33,446 5.4 4,35,963 14.1 16,45,550 6.9
Ocl-12 64,71,051 -1.3 15,71,298 -1.3 3,23,664 -2.9 4,29,781 -1.4 15,76,510 -4.2
Nov-12 67,38,713 4.1 16,42,506 4.5 3,46,256 7.0 4,64,256 8.0 15,92,704 1.0
Dec-12 69,21,815 2.7 16,50,373 0.5 3,41,900 -1.3 4,80,225 3.4 16,27,556 2.2
}an-13 70,24,577 1.5 16,90,489 2.4 3,78,892 10.8 4,88,332 1.7 17,00,129 4.5
Ieb-13 65,38,038 -6.9 16,03,015 -5.2 3,90,601 3.1 4,42,488 -9.4 15,22,755 -10.4
Mar-13 63,87,887 -2.3 16,07,224 0.3 3,91,259 0.2 4,40,395 -0.5 14,38,155 -5.6
Scurcc. BS|
70
V. Stock Market Indicators
The ralios such as markel cailaIisalion
lo GDI (m-ca ralio), lraded vaIue lo GDI
(lraded vaIue ralio) and rice lo earnings
er share (I/I ralio) are monilored lo gauge
lhe exlenl of deveIomenl of slock markel.
In successive lhird year since 2009-10, lhe
markel cailaIisalion lo GDI ralio has
decIined. The SI markel cailaIizalion lo
GDI ralio has decIined from 87.7 ercenl in
2010-11 lo 69.2 ercenl in 2011-12 and furlher
lo 63.7 ercenl in 2012-13. SimiIarIy, al NSI
aIso lhe ralio has decIined from 86.0 ercenl
lo 67.9 ercenl and furlher lo 62.2 ercenl
over lhe same eriod (TabIe 2.19). The aII-
India cash lurnover lo GDI ralio decIined
furlher in 2012-13 lo 32.5 ercenl in 2012-13
from 38.8 ercenl in 2011-12. Hovever, in lhe
derivalive segmenl, lhere vas an increase in
lhe lurnover-GDI ralio from 358.3 ercenl in
2011-12 lo 385.9 ercenl in 2012-13.
The vaIualion of lhe shares can be
gauged from lhe rice-earnings ralio (TabIe
2.20). Al lhe end of March 2013, lhe I/I ralio
of SI Sensex and S&I CNX Nifly vere
16.9 and 17.6 resecliveIy as comared lo
17.8 and 18.7 resecliveIy as on March 31,
2012. Monlh-vise dala indicale I/I ralios of
benchmark indices vas Iovesl in May 2012.
During 2012-13, lhere vas a faII in lhe I/I
ralios of aII lhe indices anaIyzed. I/I ralio of
CNX IT vas high comared lo olher secloraI
and mid-cap indices.
The rice lo book vaIue (I/) ralio is
anolher imorlanl indicalor vhich measures
lhe relurns Iefl for lhe sharehoIders afler
roviding for IiabiIilies of a comany. The I/
ralio vas lhe highesl for lhe CNX IT index
al 5.8, foIIoved by CNX Nifly al 3.0, SI
Sensex al 2.9, and SI 100 al 2.5, resecliveIy
(TabIe 2.21).
InlernalionaI comarison of I/I ralios
Table 2.18: Market Capitalisation at NSE
(` crcrc)
Year/ All listed Percentage CNX Percentage CNX Percentage CNX Percentage CNX Percentage
Month Companies Variation Nifty Variation Mid Cap Variation IT Variation Bank Variation
1 2 3 4 5 6 7 8 9 10 11
2008-09 28,96,194 -40.4 18,92,629 -33.6 2,73,627 -40.9 2,01,810 -37.5 2,24,132 -36.1
2009-10 60,09,173 107.5 15,25,162 -19.4 3,17,619 16.1 2,28,558 13.3 3,17,351 41.6
2010-11 67,02,616 11.5 17,55,468 15.1 3,12,736 -1.5 2,78,848 22.0 4,03,234 27.1
2011-12 60,96,518 -9.0 16,32,058 -7.0 3,18,794 1.9 2,55,463 -8.4 3,59,370 -10.9
2012-13 62,39,035 2.3 18,22,965 11.7 2,84,721 -10.7 2,94,435 15.3 4,19,220 16.7
Ar-12 60,59,258 -0.6 16,37,645 0.3 2,78,350 -12.7 2,40,217 -6.0 3,68,458 2.5
May-12 56,95,547 -6.0 15,37,512 -6.1 2,57,899 -7.3 2,37,323 -1.2 3,38,788 -8.1
}un-12 60,26,766 5.8 16,48,700 7.2 2,75,047 6.6 2,42,706 2.3 3,71,258 9.6
}uI-12 59,51,540 -1.2 16,33,700 -0.9 2,68,295 -2.5 2,24,981 -7.3 3,73,134 0.5
Aug-12 59,42,510 -0.2 16,45,120 0.7 2,63,661 -1.7 2,40,799 7.0 3,58,748 -3.9
Se-12 64,31,655 8.2 18,01,491 9.5 2,96,900 12.6 2,53,916 5.4 4,11,563 14.7
Ocl-12 63,37,676 -1.5 17,75,094 -1.5 2,93,964 -1.0 2,44,829 -3.6 4,04,810 -1.6
Nov-12 66,03,005 4.2 18,65,554 5.1 3,07,577 4.6 2,53,848 3.7 4,38,355 8.3
Dec-12 67,63,781 2.4 18,74,152 0.5 3,22,539 4.9 2,44,213 -3.8 4,52,144 3.1
}an-13 68,58,653 1.4 19,15,431 2.2 3,17,326 -1.6 2,74,860 12.5 4,60,863 1.9
Ieb-13 63,85,291 -6.9 18,14,313 -5.3 2,91,063 -8.3 2,89,811 5.4 4,23,642 -8.1
Mar-13 62,39,035 -2.3 18,22,965 0.5 2,84,721 -2.2 2,94,435 1.6 4,19,220 -1.0
Scurcc. NS|
71
Table 2.19: Select Ratios Relating to Stock Market
(Pcrccni)
BSE Market NSE Market Total Turnover to GDP Ratio
Year Capitalisation to Capitalisation to
GDP Ratio GDP Ratio Cash Segment Derivatives Segment
(All-India) (BSE+NSE)
1 2 3 4 5
2003-04 43.4 40.5 58.7 77.6
2004-05 54.3 50.7 53.4 82.1
2005-06 84.4 78.6 66.8 134.7
2006-07 85.5 81.2 70.0 178.9
2007-08 109.5 103.5 109.3 284.1
2008-09 55.3 51.9 69.0 197.4
2009-10 95.5 93.1 85.4 273.5
2010-11 87.7 86.0 60.1 375.2
2011-12 69.2 67.9 38.8 358.3
2012-13 63.7 62.2 32.5 385.9
Scurcc. Varicus Sicck |xcnangcs, CSO
Table 2.20: Price to Earnings Ratio
Year/ BSE Sensex BSE 100 S&P CNX CNX IT CNX Bank CNX PSE
Month CNX Nifty Mid Cap
1 2 3 4 5 6 7 8
2008-09 13.7 15.3 14.3 9.8 11.5 7.7 18.1
2009-10 21.3 21.1 22.3 15.0 23.5 17.7 15.3
2010-11 21.2 20.7 22.1 17.7 26.6 18.5 15.0
2011-12 17.8 18.8 18.7 18.1 20.9 15.3 15.4
2012-13 16.9 16.0 17.6 16.7 19.3 13.6 9.9
Ar-12 17.6 18.6 18.1 16.3 18.7 15.4 15.0
May-12 15.9 17.0 16.7 15.6 18.3 12.9 14.0
}un-12 17.0 17.0 17.5 15.3 18.6 14.1 11.8
}uI-12 16.6 16.6 17.1 14.9 16.2 13.6 11.6
Aug-12 16.5 18.8 17.6 18.7 17.3 12.7 15.5
Se-12 17.5 20.3 19.2 19.3 18.2 14.6 16.2
Ocl-12 16.8 19.5 18.4 18.9 16.8 13.9 15.6
Nov-12 17.5 17.8 18.6 16.8 17.1 14.9 9.6
Dec-12 17.5 17.6 18.7 17.7 16.4 15.4 9.6
}an-13 17.7 17.7 18.5 17.2 18.2 15.0 10.2
Ieb-13 17.0 16.2 17.7 16.7 19.0 13.7 10.3
Mar-13 16.9 16.0 17.6 16.7 19.3 13.6 9.9
Scurcc. BS|, NS|
indicales lhal Indian markels are reasonabIy
riced comared lo emerging and deveIoed
markels. Among lhe deveIoed markels
Nikkei index of }aan, NASDAQ index of
USA and AS 30 index of AuslraIia had lhe
highesl I/I ralios. In lhe emerging markels
72
years. The annuaIised voIaliIily of SI
Sensex, measured by slandard devialion of
Iog relurns, decIined lo 12.5 ercenl in 2012-
13 from 20.2 ercenl in lhe revious year.
SimiIar lrend vas aIso observed for CNX
Nifly vhich decIined lo 12.9 ercenl from
20.4 ercenl during lhe same eriod. Monlh-
vise, voIaliIily in lhe benchmark indices and
lhe broad indices vas lhe highesl in }une
2012 (TabIe 2.22). The Iovesl voIaliIily in
lhe benchmark indices vas noliced during
calegory, KOSII index of Soulh Korea,
Hermes index of Igyl and IISA index of
ChiIe had lhe highesl I/I ralios (Charl 2.8).
VI. Volatility in Stock Markets
The Indian equily markels osciIIaled
belveen eriods of buoyanl inveslor
olimism and lhose of decIines condilioned
by various domeslic and gIobaI faclors.
VoIaliIily in lhe benchmark indices droed
signihcanlIy in comarison lo lhe asl lvo
Table 2.21: Price to Book-Value Ratio
Year/ BSE Sensex BSE 100 CNX CNX CNX IT CNX Bank CNX PSE
Month Nifty Mid Cap
1 2 3 4 5 6 7 8
2008-09 2.7 2.5 2.5 1.3 3.5 1.2 2.2
2009-10 3.9 4.0 3.7 2.7 7.2 2.5 3.1
2010-11 3.7 3.7 3.7 2.3 7.4 2.8 2.8
2011-12 3.5 3.1 3.0 1.9 5.9 2.3 2.1
2012-13 2.9 2.5 3.0 1.7 5.8 2.3 1.8
Ar-12 3.2 2.7 3.1 1.7 5.6 2.4 2.1
May-12 3.0 2.5 2.9 1.6 5.4 2.2 2.0
}un-12 3.2 2.7 3.0 1.7 5.0 2.4 2.1
}uI-12 2.7 2.4 3.0 1.7 4.6 2.3 2.1
Aug-12 2.7 2.4 2.9 1.6 4.9 2.0 2.1
Se-12 2.9 2.5 3.2 1.8 5.3 2.3 2.2
Ocl-12 2.9 2.5 3.0 1.7 5.0 2.3 2.0
Nov-12 3.0 2.6 3.1 1.8 5.0 2.5 1.9
Dec-12 3.0 2.6 3.1 1.9 4.9 2.5 1.9
}an-13 3.1 2.7 3.2 1.9 5.5 2.6 2.1
Ieb-13 2.9 2.5 3.0 1.7 5.7 2.4 1.9
Mar-13 2.9 2.5 3.0 1.7 5.8 2.3 1.8
Source: SI, NSI
73
}anuary 2013. SI SmaII ca index and CNX
Nifly }unior vilnessed lhe highesl voIaliIily
in March 2013. Comared lo olher indices,
voIaliIily in CNX ank index vas higher
throughout the year.
A comarison of voIaliIily of indices
across lhe deveIoed and emerging markel
indices is shovn in TabIe 2.23 and Charl
2.9. Among lhe emerging markels, Russia
Table 2.22: Average Daily Volatility of Benchmark Indices
Month BSE Sensex CNX Nifty BSE 100 BSE Small CNX 500 CNX Nifty CNX
Cap Junior BANK
1 2 3 4 5 6 7 8
Ar-12 0.80 0.84 0.80 0.75 0.80 0.78 1.05
May-12 0.96 0.98 0.95 0.80 0.92 0.96 1.58
}un-12 1.12 1.14 1.13 0.61 1.04 1.00 1.72
}uI-12 0.87 0.89 0.86 0.92 0.84 0.86 1.04
Aug-12 0.56 0.62 0.55 0.62 0.54 0.54 0.86
Se-12 0.91 0.95 0.88 0.50 0.80 0.67 1.56
Ocl-12 0.69 0.71 0.72 0.77 0.70 0.76 1.10
Nov-12 0.72 0.73 0.72 0.66 0.68 0.81 1.07
Dec-12 1.06 0.52 1.23 0.63 0.54 0.66 0.67
}an-13 0.55 0.55 0.60 0.88 0.62 0.85 0.79
Ieb-13 0.69 0.69 0.74 0.94 0.74 0.93 1.08
Mar-13 0.82 0.84 0.89 1.10 0.89 1.08 1.39
Annualised 12.5 12.9 12.7 12.8 12.4 13.6 19.2
Volatility
Ncic. Atcragc Oai|q Vc|aii|iiq is ccnpuic! as inc sian!ar! !ctiaiicn cj inc |cgariinnic rciurns cj inc c|csing |ctc|s cj inc in!iccs.
deicled lhe highesl voIaliIily (24.7 ercenl),
foIIoved by Igyl (23.5 ercenl) and raziI
(20.8 ercenl). The voIaliIily in Indian
benchmark indices vas subslanliaIIy Iover
on a comaralive markels scaIe as veII as
lime scaIe. Among lhe deveIoed markels, lhe
annuaIised voIaliIily vas high in Iuro region
(20.7 ercenl) foIIoved by lhe Irance (20.6
ercenl) and }aan (19.0 ercenl).
74
Table 2.23: Trends in Daily Volatility of International Stock Market Indices during 2012-13
Country Index Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
DEVELOPED MARKETS
USA D}IA 0.9 0.7 1.2 0.8 0.6 0.7 0.7 1.0 0.7 0.6 0.7 0.4 11.8
USA Nasdaq 1.1 1.0 1.5 1.0 0.6 0.9 0.8 1.1 0.9 0.7 0.9 0.5 14.9
UK ITSI 100 1.2 1.2 1.0 0.9 0.8 0.9 0.7 0.9 0.3 0.6 0.9 0.5 13.5
Iuroe D} Sloxx 1.8 1.3 1.6 1.7 1.5 1.4 1.2 1.1 0.5 0.8 1.5 1.0 20.7
Irance CAC 1.9 1.4 1.6 1.6 1.3 1.4 1.2 1.1 0.5 0.7 1.5 0.9 20.6
Germany DAX 1.7 1.2 1.6 1.4 1.2 1.1 0.9 0.9 0.4 0.7 1.2 0.8 18.0
AuslraIia AS30 0.6 1.1 1.0 0.8 0.6 0.5 0.5 0.7 0.4 0.5 0.8 0.9 11.5
}aan NKY 1.0 1.2 1.2 0.9 0.9 1.1 1.0 1.0 0.9 1.6 1.8 1.4 19.0
Hong Kong HIS 1.0 1.1 1.3 1.3 0.8 1.1 0.6 1.0 0.7 0.7 1.0 0.9 15.6
Singaore STI 0.6 0.9 0.9 0.8 0.5 0.5 0.5 0.6 0.4 0.5 0.5 0.6 9.8
EMERGING MARKETS
Taivan TWSI 1.0 1.4 1.3 1.0 0.6 0.8 0.7 0.9 0.7 0.7 0.7 0.6 14.3
Russia CRTX 1.6 2.4 2.1 2.0 1.4 2.1 1.2 1.2 0.8 0.9 1.0 1.0 24.7
MaIaysia KLCI 0.3 0.6 0.5 0.3 0.2 0.7 0.3 0.4 0.4 0.6 0.5 0.5 7.2
Soulh Korea KOSII 0.8 1.3 1.4 1.3 0.9 1.1 0.7 0.8 0.5 0.7 0.7 0.6 14.6
ThaiIand SIT 1.0 1.2 1.1 1.0 0.5 0.6 0.6 0.5 0.5 0.6 0.8 1.3 13.3
China SHCOMI 0.9 0.9 1.0 0.8 0.8 1.4 0.8 0.9 1.3 1.1 1.3 1.5 16.9
S. Africa }ALSH 0.9 0.9 0.8 0.7 0.6 0.9 0.6 0.6 0.4 0.6 0.6 0.7 11.0
raziI IOV 1.2 1.7 1.8 1.9 1.3 1.4 0.9 1.5 0.8 1.1 0.8 1.2 20.8
CoIombia IGC 0.6 1.1 1.4 1.1 1.0 1.1 0.8 1.0 0.4 0.5 0.5 0.6 13.9
Hungary UX 1.5 1.3 1.6 1.1 1.0 1.2 0.8 1.1 0.7 0.9 1.1 0.9 17.6
Igyl HIRMIS 1.3 1.1 2.1 1.5 0.6 1.0 1.5 2.6 1.8 1.2 0.7 1.1 23.5
Indonesia }CI 0.7 1.0 1.5 0.9 0.7 0.9 0.5 0.6 0.5 0.7 0.6 0.9 13.2
Argenlina IG 1.1 1.4 1.4 1.1 0.8 1.0 1.1 1.0 1.1 0.9 1.5 1.0 18.1
ChiIe IISA 0.6 0.7 0.9 0.5 0.8 0.5 0.5 0.3 0.4 0.5 0.5 0.6 9.3
Mexico MIXOL 0.6 0.9 0.8 0.8 0.5 0.6 0.6 0.7 0.5 0.5 0.8 0.9 11.0
India BSE Sensex 0.8 1.0 1.1 0.9 0.6 0.9 0.7 0.7 0.5 0.6 0.7 0.8 12.5
India CNX Nifly 0.8 1.0 1.1 0.9 0.6 1.0 0.71 0.73 0.5 0.6 0.7 0.8 12.9
Scurcc. B|ccn|crg Scrticcs Ncic. Oai|q tc|aii|iiq is ccnpuic! as inc sian!ar! !ctiaiicn cj !ai|q rciurns cn c|csing ta|ucs cj
in!iccs jcr inc rcspcciitc ncnins. Annua|isc! tc|aii|iiq is ca|cu|aic! as !ai|q tc|aii|iiq jcr inc nancia| qcar nu|iip|ic!
|q inc squarc rcci cj nun|cr cj ira!ing !aqs !uring inc pcric!.
A
n
n
u
a
l
i
s
e
d
V
o
l
a
t
i
l
i
t
y
75
VII. Trading Frequency
Liquidily in slock markels is measured
by lhe lrading frequency of Iisled slocks al
SI and NSI. The number of comanies
Iisled al SI al lhe end of March 2013 vas
5,211. Al NSI, lhe number of comanies
Iisled vas 1,666 as on March 31, 2013.
Trading frequency imroved al bolh lhe
stock exchanges in 2012-13 over the previous
hnanciaI year. During 2012-13, lhe number
of securilies lraded in SI vas 4,146 as
comared lo 3,923 in 2011-12 (TabIe 2.24).
SimiIarIy, lhe number of securilies lraded in
NSI vas higher al 1,637 in 2012-13 comared
lo 1,627 in 2011-12. The ercenlage share
of securilies lraded al SI above 100 days
marginaIIy decreased from 81.3 ercenl in
2011-12 lo 78.0 ercenl in 2012-13. Al NSI,
lhis ercenlage increased from 94.0 ercenl
in 2011-12 lo 95.4 ercenl in 2012-13. The
ercenlage share of securilies lraded for Iess
lhan 10 days vas 8.7 ercenl al SI and 2.0
percent at NSE in 2012-13.
Share of lo 10 brokers in annuaI cash
market turnover in 2012-13 at NSE and BSE
vas 24.7 and 22.3 ercenl resecliveIy (TabIe
2.25). Share of lo 10 securilies in annuaI
cash market turnover in 2012-13 at NSE and
SI vas 26.2 and 20.6 ercenl resecliveIy.
Al NSI, conlribulion in annuaI cash markel
lurnover in 2012-13 reveaIs lhal rorielary
lrades, domeslic inslilulions (excIuding
muluaI funds), IIIs, and muluaI funds
conlribuled 23.3 ercenl, 5.0 ercenl, 20.6
ercenl and 4.4 ercenl resecliveIy vhereas
olhers (incIuding individuaIs, arlnershi
hrms, HUIs, Trusls, NRIs, elc) conlribuled
46.8 ercenl. SimiIarIy al SI annuaI cash
Table 2.24: Trading Frequency of Listed Stocks
Trading
2011-12 2012-13
Frequency
BSE NSE BSE NSE
(Range of No. of Percentage No. of Percentage No. of Percentage No. of Percentage
Days) Shares of Shares of Shares of Shares of
Traded Total Traded Total Traded Total Traded Total
1 2 3 4 5 6 7 8 9
Above 100 3,190 81.3 1,530 94.0 3,232 78.0 1,561 95.4
91-100 37 0.9 5 0.3 48 1.2 3 0.2
81-90 43 1.1 8 0.5 46 1.1 6 0.4
71-80 39 1.0 7 0.4 67 1.6 5 0.3
61-70 35 0.9 5 0.3 72 1.7 5 0.3
51-60 45 1.1 6 0.4 55 1.3 9 0.5
41-50 56 1.4 3 0.2 73 1.8 3 0.2
31-40 53 1.4 3 0.2 65 1.6 3 0.2
21-30 53 1.4 8 0.5 58 1.4 6 0.4
11-20 50 1.3 8 0.5 70 1.7 4 0.2
1-10 322 8.2 44 2.7 360 8.7 32 2.0
Total 3,923 100.0 1,627 100.0 4,146 100.0 1,637 100.0
Scurcc. BS|, NS|
76
markel lurnover dala for 2012-13 shovs lhal
rorielary lrades, domeslic inslilulions
(excIuding muluaI funds), IIIs, and muluaI
funds conlribuled 24.0 ercenl, 2.4 ercenl,
9.2 ercenl and 2.5 ercenl resecliveIy
vhereas olhers (incIuding individuaIs,
arlnershi hrms, HUIs, Trusls, NRIs, elc)
conlribuled 62.1 ercenl. (TabIe 2.21)
VIII. Activities of Stock Exchanges
Over lhe years, NSI and SI have
emerged as lhe nalion-vide slock exchanges
of lhe counlry conlribuling more lhan 99
ercenl of lhe lolaI lurnover. Aarl from NSI
and SI, onIy CaIcuua slock exchange and
MCX-SX reorled some lransaclions during
2012-13 (TabIe 2.26).
During 2012-13, lhe aII India lurnover al
lhe slock exchanges decIined by 6.4 ercenl
on lhe lo of decIine of 25.6 ercenl during
2011-12. WhiIe lhe number of shares lraded
and deIivered and vaIue of shares deIivered
increased al NSI, over lhe revious year,
in SI il had regislered a decIine. In lhe
CaIcuua slock exchange, onIy lhe vaIue of
shares deIivered recorded faII during lhe
hnanciaI year. Of lhe lolaI quanlily of shares
lraded, NSI had a Iion's share of 74.4 ercenl,
foIIoved by SI (25.5 ercenl). NSI had a
share of 65.2 ercenl in lhe quanlily of shares
deIivered foIIoved by SI (34.5 ercenl). In
lhe lolaI vaIue of shares deIivered, share of
NSI vas 82.3 ercenl, foIIoved by SI al
17.4 ercenl.
As many of lhe RSIs are dormanl, lheir
aclivilies are mainIy rouled lhrough lhe
subsidiaries vhich have laken u lrading
membershi of SI and NSI. During 2012-13,
ma|orily of lhe subsidiaries recorded decIine
in lhe voIume of lransaclion. Hovever, lhe
lolaI lurnover of aII lhe subsidiaries recorded
a rise of 7.5 ercenl lo ` 2,22,019 crore
during 2012-13 from ` 2,06,472 crore during
2011-12 (TabIe 2.27). This vas rimariIy on
accounl of increase in lurnover recorded in
four subsidiaries Ied by M/s GSI IinanciaIs
Lld., M/s ISI Securilies and Services Lld., M/s
UISI Securilies Lld. and M/s MSI IinanciaI
Services Lld.
Table 2.25: Share of Brokers, Securities and Participants in Cash Market Turnover (2012-13)
S. No. Particulars
Percentage Share
NSE BSE
1 Share of To 10 rokers in annuaI cash markel lurnover 24.7 22.3
2 Share of To 10 Scris/securilies in annuaI cash markel lurnover 26.2 20.6
3 Share of arlicianls in annuaI cash markel lurnover
i) Irorielary lrades 23.3 24.0
ii) Domeslic Inslilulions (excIuding MIs) 5.0 2.4
iii) IIIs 20.6 9.2
iv) MIs 4.4 2.5
v) Olhers 46.8 62.1
Total of (i) to (v) 100.0 100.0
Ncic. Ocncsiic |nsiiiuiicns (cxc|u!ing nuiua| jun!s) inc|u!cs |anks, O||s, insurancc ccnpanics an! Ncu Pcnsicn Scncnc.
Oincrs |nc|u!c |ciai|, N|| an! Q||.
Scurcc. BS|, NS|
77
IX. Dematerialisation
The enaclmenl of Deosilories Acl
in Augusl 1996 ushered in lhe vave of
demaleriaIizalion by lhe eslabIishmenl of
deosilories. DemaleriaIizalion has been
lhe bedrock of cailaI markel reforms since
lhen as il aved lhe vay for successive
lechnoIogicaI advancemenls and simIihed
l he l radi ng, sel l I emenl and record
preservation.
Al lhe end of March 2013, lhere are
127 Iakh demal accounls al NSDL and 83
Iakh demal accounls al CDSL. As on March
31, 2013, 10,844 comanies have signed u
for demaleriaIisalion al NSDL and 8,329 al
CDSL (TabIe 2.28). Al NSDL, quanlily of
demaleriaIised securilies increased by 18.4
ercenl lo 68,64,758 Iakh in 2012-13 from
57,98,010 Iakh in 2011-12. Al CDSL loo, lhe
quanlily of demaleriaIised securilies increased
Table 2.26: Trading Statistics of Stock Exchanges
Stock Shares Value of Shares Delivered
Exchange
Traded (lakh) Delivered (lakh)
(` crore)
2011-12 2012-13 2011-12 2012-13 2011-12 2012-13
1 2 3 4 5 6 7
Recognized Stock Exchanges
Ahmedabad NiI NiI NiI NiI NiI NiI
SI 6,54,137 5,63,883 2,55,999 2,43,217 1,81,560 1,68,490
(28.9) (25.5) (36.54) (34.54) (18.74) (17.40)
angaIore NiI NiI NiI NiI NiI NiI
hubanesvar NiI NiI NiI NiI NiI NiI
CaIcuua 1,681 1,776 1,380 1,628 3,119 2,876
(0.07) (0.08) (0.20) (0.23) (0.32) (0.30)
Cochin NiI NiI NiI NiI NiI NiI
Coimbalore NiI NiI NiI NiI NiI NiI
DeIhi NiI NiI NiI NiI NiI NiI
Gauhali NiI NiI NiI NiI NiI NiI
ISI NiI NiI NiI NiI NiI NiI
}aiur NiI NiI NiI NiI NiI NiI
Ludhiana NiI NiI NiI NiI NiI NiI
Madras NiI NiI NiI NiI NiI NiI
MCX 17.12 0.3 205
0.00 0.00 0.00
MISI NiI NiI NiI NiI NiI NiI
NSI 16,05,205 16,44,259 4,43,232 4,59,349 7,84,407 7,96,784
(70.99) (74.40) (63.26) (65.23) (80.94) (82.30)
OTCII NiI NiI NiI NiI NiI NiI
Iune NiI NiI NiI NiI NiI NiI
UISI NiI NiI NiI NiI NiI NiI
Vadodara NiI NiI NiI NiI NiI NiI
Total 22,61,023 22,09,936 7,00,611 7,04,195 9,69,086 9,68,355
Ncic. |igurcs in parcnincscs in!icaic pcrccniagc snarc ic icia|.
78
Table 2.27: Turnover of Subsidiaries of Stock Exchanges
Stock No. of
Name of the Subsidiary
Turnover of Subsidiary Percentage
Exchange Subsidiary/ (` crore) Variation
ies
2011-12 2012-13
1 2 3 4 5 6
Recognised Stock Exchanges
Ahmedabad 1 ASI CailaI Markels Lld. 24,671 18,801 -23.8
angaIore 1 GSI IinanciaIs Lld. 13,197 34,369 160.4
Cochin 1 Cochin Slock rokers Lld. 4,045 3,334 -17.6
DeIhi 1 DSI IinanciaI Services Lld. 6,817 4,655 -31.7
ISI 1 ISI Securilies and Services Lld. 31,962 64,781 102.7
}aiur 1 }SIL Securilies Lld. 3,812 2,994 -21.5
Ludhiana 1 LSI Securilies Lld. 97,504 77,176 -20.8
Madras 1 MSI IinanciaI Services Lld. 574 599 4.4
MISI 1 MISI Securilies Lld. 3,681 0
OTCII 1 OTCII Securilies Lld. 331 97 -70.8
Iune 1 ISI Securilies Lld. 2,159 2,120 -1.8
UISI 1 UISI Securilies Lld. 2,749 3,537 28.7
Vadodara 1 VSI Slock Services Lld. 14,971 9,558 -36.2
Total 2,06,472 2,22,019 7.5
Table 2.28: Depository Statistics
NSDL CDSL
Particulars
2011-12 2012-13 2011-12 2012-13
1 2 3 4 5
No. of Inveslor Accounls (Iakh) 121 127 79 83
No. of Comanies Signed u (Iisled and unIisled) 9,741 10,844 8,329 8,062
No. of Comanies AvaiIabIe for Demal 9,741 10,844 8,329 8,062
(Iisled and unIisled)
Demal Quanlily of Securilies (Iakh) 57,98,010 68,64,758 13,35,700 15,17,926
No. of Shares SeuIed in Demal (Iakh) 7,20,656 7,37,773 3,78,325 4,27,352
VaIue of Shares SeuIed in Demal (` crore) 12,47,249 12,72,531 2,90,572 3,19,491
Markel CailaIisalion of 62,65,157 64,39,115 63,10,530 65,21,762
Comanies in Demal (` crore)
Ralio of demaleriaIized equily shares lo 81.4 82.5 16.3 14.5
lolaI oulslanding shares (Iisled)
Ncic. 1) Sccuriiics inc|u!cs ccnncn cquiiq snarcs, prcjcrcniia| snarcs, nuiua| jun! uniis, !c|cniurcs an! ccnncrcia| papcr.
Sccuriiics inc|u!c incsc cj |cin |isic! an! un|isic! ccnpanics.
Scurcc. NSOI, COSI
by 26.8 ercenl from 13,35,700 Iakh in 2011-
12 lo 15,17,926 Iakh in 2012-13. WhiIe lhe
quanlily of demaleriaIised shares increased
al lhe CDSL, lhe quanlily and vaIue of shares
seuIed in demal decIined. On lhe olher hand
al NSDL, bolh lhe quanlily and vaIue of
shares seuIed in demal increased. The lolaI
vaIue of demal seuIed shares increased by
79
miniscuIe 2.0 ercenl from ` 12,47,249 crore
in 2011-12 to ` 12,72,531crore in 2012-13 al
NSDL. The same in case of CDSL increased
by 10.0 ercenl from ` 2,90,572 crore in
2011-12 to ` 3,19,491 crore in 2012-13. The
ralio of demaleriaIised equily shares lo lolaI
oulslanding shares of Iisled comanies vas
82.5 ercenl al NSDL and 14.5 ercenl al
CDSL al lhe end of 2012-13.
Aarl f rom l he equi l y shares,
demaleriaIisalion faciIily is aIso oered for
olher inslrumenls Iike commerciaI aer
and bonds. The lolaI demaleriaIised vaIue
of lhe commerciaI aers increased al bolh
NSDL and CDSL (TabIe 2.29). Al NSDL,
demaleriaIised vaIue of commerciaI aer
rose from ` 90,019 crore in 2011-12 lo 1,08,758
crore in 2012-13. Hovever, lhe demaleriaIised
vaIue of commerciaI aer al CDSL decIined
from ` 1,299 crore in 2011-12 lo ` 703 crore
in 2012-13. The number of aclive inslrumenls
and demaleriaIised vaIue of debenlures/bonds
increased al NSDL and CDSL in 2012-13 over
2011-12.
Deosilory arlicianls as a cIass
of inlermediary form lhe backbone of
lhe demaleriaIised framevork in Indian
securilies markel. The geograhicaI coverage
of deosilory arlicianls (DIs) of NSDL and
CDSL videned in 2012-13. The DI Iocalions
for NSDL vere avaiIabIe al 1,581 cilies in
2012-13 as comared lo 1,554 cilies in 2011-12
(TabIe 2.30). On lhe olher side, lhe number of
DI Iocalions decIined considerabIy for CDSL
from 2,104 in 2011-12 lo 1,594 in 2012-13.
Table 2.29: Depository Statistics: Debentures / Bonds and Commercial Paper
Debentures / Bonds Commercial Papers
Particulars 2011-12 2012-13 2011-12 2012-13
NSDL CDSL NSDL CDSL NSDL CDSL NSDL CDSL
1 2 3 4 5 6 7 8 9
No. of Issuers 606 410 742 477 197 19 186 12
No. of Aclive 7746 5,687 8,993 6,911 1,263 75 1,167 85
Instruments
Demal VaIue 10,29,389 28,443 12,74,193 36,197 90,019 1,299 1,08,758 703
(` crore)
Scurcc. NSOI, COSI
Table 2.30: Cities according to Number of DP Locations: Geographical Spread
NSDL CDSL
No. of DP Locations
2011-12 2012-13 2011-12 2012-13
1 2 3 4 5
0 > 10 1,361 1,386 1,906 1,424
10-20 86 87 86 78
21-50 66 67 74 56
51-100 24 23 20 21
> 100 17 18 18 15
Total 1,554 1,581 2,104 1,594
Ncic. Tnc nun|cr cj OP |ccaiicns ai COSI, inc|u!cs |ccaiicns inai natc |ack c[cc ccnnccic! ccnircs cj inc OPs.
Scurcc. NSOI, COSI
80
X. Derivatives Segment
Derivalives markels are cenlraI lo
loday's financiaI markels. The imressive
grovlh in derivalives markels have been
driven by lhe roducl and lechnoIogy
innovalion in consonance vilh comelilion.
Over lhe years, derivalives markels have
evoIved as lhe singIe Iargesl segmenl in
gIobaI hnanciaI markels vilh lraded lurnover
oulslriing lhe lurnover in equily and bond
markets.
A. Equity Derivatives Segment
The equily derivalives segmenl is lhe
mosl vibranl, aclive and dominanl segmenl
in the Indian securities market. Over the
years, lhere has been manifoId increase
in lhe voIumes - bolh in lerms of number
of conlracls lraded and lraded vaIue and
roducls lraded. India hoIds a signihcanl
Iace in lhe arena of vorId derivalive
markels. CurrenlIy, India's NSI, MCX Grou
and SI vere found lo be among lhe lo
30 derivalive exchanges, vhen osilioned
by lhe number of conlracls lraded and/or
cIeared. VoIumes of derivalives markel have
far exceeded lhal of cash segmenl lhal as
al lhe cIose of 2012-13, lhe lurnover in lhe
derivalives markel vas 12.6 limes of lhe Iauer
(Charl 2.10). Trading in equily derivalives
segmenl is dominaled by NSI, vhich has a
share of more lhan 81.5 ercenl of lhe lolaI
lurnover. MCX- SX commenced ils oeralions
in lhe equily derivalive segmenl vilh eecl
from Iebruary 11, 2013.
The lolaI number of conlracls lraded in
lhe derivalive segmenl of NSI decreased by
6.1 ercenl lo 113,14,67,418 in 2012-13 from
120,50,45,464 in 2011-12, vhereas, al SI,
lhe number of conlracls lraded exIoded al
714.5 ercenl from 3,22,22,825 in 2011-12 lo
26,24,43,366 in 2012-13. In SI, voIumes vere
driven mainIy by lhe incenlives oered by lhe
exchange. The vaIue of lhe conlracls lraded in
lhe derivalive segmenl of NSI increased by
0.6 ercenl lo ` 3,15,33,004 crore in 2012-13
from ` 3,13,49,732 crore in 2011-12, vhereas
lhe lurnover al lhe derivalives segmenl of
81
SI increased by 786.1 ercenl lo 71,63,519
crore in 2012-13 from ` 8,08,476 crore in
2011-12. The open interest in the derivative
segmenl of NSI decIined by 3.5 ercenl lo
` 85,952 crore al lhe end of 2012-13 from
` 89,049 crore al lhe end of 2011-12
The monlhIy lurnover in lhe derivalives
segment at NSE recorded a mixed trend
during 2012-13 (TabIe 2.31). The highesl
lurnover vas recorded in March 2013
(` 31,27,446 crore) foIIoved by }anuary 2013
(` 29,50,975crore) and May 2012 (` 27,19,843
crore). Grovlh in lhe derivales lurnover
al NSI vas lhe highesl in May 2012 vhen
lurnover rose by 23.2 ercenl, foIIoved by
March 2013 (21.4 ercenl) and }anuary 2013
(11.8 ercenl). The average daiIy lurnover al
NSI in 2012-13 increased marginaIIy by 0.6
percent to ` 1, 26,639 crore in 2012-13 from
` 1, 25,903 crore in 2011-12.
MCX -SX commenced ils oeralions in
lhe equily derivalive segmenl on Iebruary
11, 2013. In lhe eriod from Iebruary-March
2013, 2.75 Iakh conlracls vere lraded recoding
a lurnover of ` 8,049 crore.
The equily derivalives markels have
exerienced considerabIe shifls in lhe roducl
shares in lhe recenl years (TabIe 2.32). TiII
2006-07, singIe slock fulures vere lhe mosl
lraded roducl in India. During 2012-13, lhe
Iargesl share in lhe lolaI derivalives lurnover
has been conlribuled by Index olions vilh
Table 2.31: Trends in Turnover and Open Interest in Equity Derivatives Segment
Turnover Open Interest at the End of the Year / Month
Year/Month No. of Contracts
(` crore)
No. of Notional Turnover
Contracts (` crore)
NSE BSE NSE BSE NSE BSE NSE BSE
1 2 3 4 5 6 7 8 9
2008-09 65,73,90,497 4,96,502 1,10,10,482 11,775 32,27,759 22 57,705 0
2009-10 67,92,93,922 9,026 1,76,63,665 234 34,89,790 0 97,978 0
2010-11 103,42,12,062 5,623 2,92,48,221 154 36,90,373 4 1,01,816 0
2011-12 120,50,45,464 3,22,22,825 3,13,49,732 8,08,476 33,44,473 28,176 89,049 736
2012-13 113,14,67,418 26,24,43,366 3,15,33,004 71,63,519 30,41,192 90,075 85,952 2,299
Ar-12 8,28,12,184 1,41,15,666 22,07,317 3,69,717 34,59,455 44,311 89,002 1,151
May-12 11,01,52,708 2,51,19,550 27,19,843 6,24,296 33,75,635 59,434 80,736 1,446
}un-12 10,50,12,433 2,89,86,767 26,40,706 7,32,483 38,76,435 84,988 1,02,040 1,741
}uI-12 9,31,81,580 3,79,12,818 24,53,083 9,78,143 42,61,297 88,708 1,10,888 2,294
Aug-12 9,09,91,925 3,28,26,346 24,32,169 8,74,355 38,51,378 90,861 99,959 2,397
Se-12 9,33,63,996 1,11,09,685 25,91,948 3,05,319 41,04,440 78,946 1,17,367 2,237
Ocl-12 9,37,97,175 1,44,04,176 27,14,209 4,10,845 45,04,745 99,755 1,23,027 2,789
Nov-12 8,65,73,274 1,93,75,154 24,79,817 5,46,582 41,43,519 48,792 1,19,945 1,438
Dec-12 8,83,79,684 3,07,47,136 26,40,393 8,99,853 36,84,066 68,370 1,11,815 2,028
}an-13 9,46,54,356 3,05,26,334 29,50,975 9,23,441 31,42,662 7,341 97,245 219
Ieb-13 8,54,85,498 78,61,330 25,75,097 2,29,470 33,66,109 86,079 96,291 2,402
Mar-13 10,70,62,605 94,58,404 31,27,446 2,69,014 30,41,192 90,075 85,952 2,299
Scurcc. BS|, NS|
82
77.0 ercenl. Share of singIe slock fulures
have decIined subslanliaIIy over lhe years and
nov conslilule a mere 10.9 ercenl in 2012-13.
Index fulures share consliluled 6.8 ercenl of
lhe lurnover of derivalives markel in 2012-13.
The share of slock olions increased from 3.0
ercenl in 2011-12 lo 5.2 ercenl in 2012-13
(Charl 2.11).
Table 2.32: Product-wise Derivatives Turnover at NSE and BSE
(Pcrccni)
Year / Month Index Futures Index Options Single Stock Single Stock Total
Options Futures
1 2 3 4 5 6
2008-09 32.4 33.9 2.1 31.6 100.0
2009-10 22.3 45.5 2.9 29.4 100.0
2010-11 14.9 62.8 3.5 18.8 100.0
2011-12 11.7 72.6 3.0 12.7 100.0
2012-13 6.8 77.0 5.2 10.9 100.0
Ar-12 10.1 74.2 3.9 11.8 100.0
May-12 8.6 79.0 3.4 9.1 100.0
}un-12 8.5 79.3 3.2 9.0 100.0
}uI-12 7.1 79.2 4.0 9.8 100.0
Aug-12 6.3 79.8 4.4 9.5 100.0
Se-12 7.3 74.9 5.7 12.1 100.0
Ocl-12 7.0 74.1 6.5 12.4 100.0
Nov-12 5.7 76.8 5.9 11.5 100.0
Dec-12 5.1 78.8 5.0 11.1 100.0
}an-13 5.0 74.5 7.7 12.8 100.0
Ieb-13 6.5 73.6 7.0 12.9 100.0
Mar-13 6.1 78.7 5.5 9.6 100.0
Scurcc. BS|, NS|
83
In lhe index derivalives segmenl of
NSI, derivalives are oered on lhe foIIoving
indices- Nifly, Nifly Midca 50, ank Nifly,
CNX Infra, CNX IT and CNX ISI. Index
derivalives are aIso aIIoved in lhree foreign
indices viz., Dov }ones index, S&I 500 and
UK ITSI 100 index. On an average, for
2012-13, Nifly fulures and olions accounled
for more lhan 90 ercenl share in lhe index
derivalive lurnover. ank Nifly comrised a
share in lhe range of 3 lo 8 ercenl in 2012-
13. Al SI, lhe share of derivalives on SI
Sensex fIuclualed belveen 0.8 ercenl lo
100 ercenl over lhe monlhs. Turnover of
derivalives on SI 100 index aIso uclualed
vilhin lhe range of 0.01 ercenl-99.9 ercenl.
In SI aIso fulures are avaiIabIe on foreign
indices, viz., HSI index, MICIX index, ITSI/
}SI lo40 and ovesa index.
Iroducl-vise share in lhe oen inleresl
shovs lhal lhe nolionaI vaIue of oulslanding
conlracls vas lhe highesl for Index Olions
(` 53,504 crore) foIIoved by singIe Slock
Iulures (` 22,170 crore), Index Iulures
(` 8,562 crore), and Slock Olions (` 4,005
crore). The labIes 2.33 lo 2.36 shov lhe
roducl-vise lrends in lhe derivalive markel
in India during the recent years.
Among lhe various cIasses of derivalive
members, lhe lransaclions underlaken
by lrading-cum-seIf cIearing members
conlribuled 51. 7 ercenl of lhe lolaI
lurnover of lhe I&O segmenl in 2012-13.
Table 2.33: Trends in Index Futures at NSE and BSE
Open Interest at the End of
Year/ No. of Contracts Notional Turnover the Year / Month
Month (` crore) No. of Notional Turnover
Contracts (` crore)
1 2 3 4 5 6 7 8 9
2008-09 21,04,28,103 4,95,830 35,70,111 11,757 8,28,369 22 12,060 0.3
2009-10 17,83,06,889 3,744 39,34,389 96 5,81,510 0 14,979 0
2010-11 16,50,23,653 5,613 43,56,755 154 6,18,576 4 16,941 0.1
2011-12 14,61,88,740 70,73,334 35,77,998 1,78,449 5,71,933 11,693 14,341 305
2012-13 9,61,00,385 47,04,602 25,27,131 1,22,374 2,97,198 2,080 8,503 59
Ar-12 92,18,725 12,12,385 2,28,989 31,589 5,24,030 17,655 12,955 459
May-12 1,14,44,310 8,70,652 2,66,002 20,859 4,31,114 28,288 9,914 688
}un-12 1,10,66,729 8,32,231 2,64,304 20,776 6,14,699 47,996 15,530 1,255
}uI-12 90,49,837 6,70,155 2,24,504 17,575 6,14,326 57,328 15,382 1,482
Aug-12 78,81,956 3,32,146 1,99,628 8,818 5,14,566 54,277 13,063 1,421
Se-12 78,15,624 1,63,740 2,06,910 4,516 6,09,549 56,549 16,634 1,600
Ocl-12 79,25,535 1,27,788 2,16,004 3,636 4,93,067 32,473 12,648 912
Nov-12 61,69,741 79,823 1,69,757 2,274 5,02,165 31,571 14,207 932
Dec-12 60,81,895 80,551 1,76,492 2,400 4,06,859 31,380 11,725 937
}an-13 63,37,412 1,20,434 1,90,094 3,674 3,09,576 1,230 9,431 37
Ieb-13 60,51,654 1,18,539 1,79,682 3,484 3,52,371 27,069 10,088 765
Mar-13 70,56,967 96,158 2,04,763 2,773 2,97,198 2,080 8,503 59
Scurcc. BS|, NS|
84
Table 2.34: Trends in Single Stock Futures at NSE and BSE
Open Interest at the End of the
Year/ No. of Stocks No. of Notional Turnover Year / Month
Month Traded Contracts (` crore) No. of Notional Turnover
Contracts (` crore)
NSE BSE NSE BSE NSE BSE NSE BSE NSE BSE
1 2 3 4 5 6 7 8 9 10 11
2008-09 250 3 22,15,77,980 299 34,79,642 9 5,11,334 0 15,722 0.0
2009-10 190 0 14,55,91,240 6 51,95,247 0 9,90,917 0 32,053 0.0
2010-11 223 0 18,60,41,459 0 54,95,757 0 11,26,190 0 28,354 0.0
2011-12 217 219 15,83,44,617 3,26,342 40,74,671 10,216 8,86,326 19 24,663 1
2012-13 146 122 14,77,11,691 1,16,933 42,23,872 3,418 7,90,886 417 22,168 12
Ar-12 215 19 1,07,39,998 1,299 3,03,853 36 10,20,668 0 25,905 0
May-12 210 14 1,27,48,867 123 3,03,008 3 9,45,947 0 21,736 0
}un-12 210 18 1,24,82,626 0 3,04,796 0 10,23,838 0 27,299 0
}uI-12 208 58 1,24,36,098 404 3,35,785 10 10,61,842 0 27,845 0
Aug-12 208 87 1,16,75,491 1,059 3,15,699 29 10,40,212 2 26,570 0
Se-12 207 130 1,24,41,509 1,799 3,49,877 46 10,66,649 3 31,311 0
Ocl-12 156 88 1,29,92,449 1,322 3,88,103 40 11,81,950 0 31,189 0
Nov-12 152 67 1,22,03,483 459 3,49,431 13 11,63,804 0 32,886 0
Dec-12 151 72 1,28,74,846 836 3,92,327 25 10,93,228 0 35,144 0
}an-13 149 114 1,46,48,279 21,272 4,95,366 670 10,17,631 2 32,718 0
Ieb-13 148 113 1,15,00,825 20,615 3,61,294 590 8,93,704 217 25,810 7
Mar-13 146 122 1,09,67,220 67,745 3,24,332 1,956 7,90,886 417 22,168 12
Scurcc. BS|, NS|
Table 2.35: Trends in Index Options at NSE and BSE
Year/ No. of Contracts Notional Turnover the Year / Month
Month (` crore) No. of Notional Turnover
Contracts (` crore)
1 2 3 4 5 6 7 8 9
2008-09 21,20,88,444 373 37,31,502 9 18,09,483 0 27,402 0.0
2009-10 34,13,79,523 5,276 80,27,964 138 18,19,841 0 47,808 0.0
2010-11 65,06,38,557 0 1,83,65,366 0 18,90,463 0 55,022 0.0
2011-12 86,40,17,736 2,47,75,644 2,27,20,032 6,18,342 17,96,546 16,464 47,540 430
2012-13 82,08,77,149 25,72,33,961 2,27,81,574 70,27,481 18,48,581 34,729 52,523 981
Ar-12 5,93,96,590 1,29,01,982 15,73,860 3,38,092 17,69,785 26,656 46,408 692
May-12 8,14,52,069 2,42,48,628 20,37,937 6,03,432 19,16,878 31,146 47,161 758
}un-12 7,72,61,461 2,81,54,295 19,63,477 7,11,702 21,27,363 23,955 56,125 626
}uI-12 6,69,82,807 3,72,41,751 17,57,190 9,60,545 23,99,316 31,380 62,702 811
Aug-12 6,63,59,441 3,24,91,306 17,73,000 8,65,467 21,37,543 36,456 56,105 963
Se-12 6,74,58,468 1,09,37,357 18,70,592 3,00,612 22,67,968 22,291 64,666 634
Ocl-12 6,64,95,200 1,42,68,372 19,07,596 4,07,019 25,76,739 66,770 72,393 1,866
Nov-12 6,22,25,955 1,92,89,130 17,81,059 5,44,170 23,05,664 17,116 67,825 503
Dec-12 6,36,83,543 3,06,52,658 18,93,973 8,97,110 20,06,322 35,877 59,336 1,059
}an-13 6,47,66,416 3,03,54,345 19,66,918 9,18,184 16,71,651 6,109 50,538 182
Ieb-13 6,18,01,321 76,53,778 18,39,346 2,23,505 19,81,418 45,559 56,418 1,290
Mar-13 8,29,93,878 90,40,359 24,16,627 2,57,644 18,48,581 34,729 52,523 981
Scurcc. BS|, NS|
85
The ercenlage share in lhe lraded vaIue by
lrading-cum- cIearing members and lrading
members vas 33.1 ercenl and 15.2 ercenl,
resecliveIy (TabIe 2.37).
Table 2.36: Trends in Stock Options at NSE and BSE
Year / No. of No. of Notional Turnover the Year / Month
Month Stocks Contracts (` crore) No. of Notional Turnover
Contracts (` crore)
NSE BSE NSE BSE NSE BSE NSE BSE NSE BSE
1 2 3 4 5 6 7 8 9 10 11
2008-09 250 115 1,32,95,970 0 2,29,227 0 78,573 0 2,521 0.0
2009-10 190 98 1,40,16,270 0 5,06,065 0 97,522 0 3,137 0.0
2010-11 223 89 3,25,08,393 0 10,30,344 0 55,144 0 1,499 0.0
2011-12 216 217 3,64,94,371 47,505 9,77,031 1,469 89,668 0 2,504 0
2012-13 146 146 6,67,78,193 3,87,870 20,00,427 10,246 1,04,527 52,849 2,758 1,247
Ar-12 215 216 34,56,871 0 1,00,615 0 1,44,972 0 3,734 0
May-12 210 212 45,07,462 147 1,12,897 3 81,696 0 1,926 0
}un-12 210 211 42,01,617 241 1,08,129 5 1,10,535 0 3,086 0
}uI-12 208 209 47,12,838 508 1,35,603 13 1,85,813 0 4,959 0
Aug-12 208 209 50,75,037 1,835 1,43,841 42 1,59,057 126 4,221 3
Se-12 207 208 56,48,395 6,789 1,64,569 146 1,60,274 103 4,757 2
Ocl-12 156 156 63,83,991 6,694 2,02,506 150 2,52,989 512 6,797 11
Nov-12 152 152 59,74,095 5,742 1,79,570 125 1,71,886 105 5,027 3
Dec-12 151 151 57,39,400 13,091 1,77,600 317 1,77,657 1,113 5,610 32
}an-13 149 149 89,02,249 30,283 2,98,597 914 1,43,804 0 4,558 0
Ieb-13 148 148 61,31,698 68,398 1,94,775 1,890 1,38,616 13,234 3,976 340
Mar-13 146 146 60,44,540 2,54,142 1,81,724 6,641 1,04,527 52,849 2,758 1,247
Source: SI, NSI
Table 2.37: Shares of Various Classes of Members in Derivative Turnover at NSE and BSE
Turnover (` crore) Percentage Share
Year / Month Trading Trading Trading Total Trading Trading Trading
Members cum cum Self Members cum cum Self
Clearing Clearing Clearing Clearing
Members Members Members Members
1 2 3 4 5 6 7 8
2008-09 33,99,848 1,24,60,554 61,84,083 2,20,44,486 15.4 56.5 28.1
2009-10 48,99,892 2,02,12,013 1,02,15,902 3,53,27,807 13.9 57.2 28.9
2010-11 75,50,080 3,35,63,069 1,74,04,062 5,85,17,211 12.9 57.4 29.7
2011-12 79,81,555 3,45,47,595 2,05,54,043 6,30,83,193 12.7 54.8 32.6
2012-13 96,14,647 2,08,51,487 3,25,99,875 6,30,66,008 15.2 33.1 51.7
Ar-12 6,28,083 14,60,834 23,25,717 44,14,634 14.2 33.1 52.7
May-12 7,82,473 17,87,357 28,69,856 54,39,686 14.4 32.9 52.8
}un-12 7,11,493 17,54,138 28,15,782 52,81,413 13.5 33.2 53.3
}uI-12 7,12,395 17,27,062 24,66,709 49,06,166 14.5 35.2 50.3
Aug-12 7,34,070 16,45,518 24,84,749 48,64,337 15.1 33.8 51.1
Se-12 7,60,212 17,11,826 27,11,858 51,83,897 14.7 33.0 52.3
Ocl-12 8,20,548 17,97,597 28,10,274 54,28,419 15.1 33.1 51.8
Nov-12 7,99,236 16,16,085 25,44,313 49,59,633 16.1 32.6 51.3
Dec-12 8,47,974 17,21,974 27,10,838 52,80,786 16.1 32.6 51.3
}an-13 9,85,202 18,52,805 30,63,943 59,01,950 16.7 31.4 51.9
Ieb-13 8,24,263 16,91,663 26,34,269 51,50,195 16.0 32.8 51.1
Mar-13 10,08,697 20,84,628 31,61,567 62,54,892 16.1 33.3 50.5
Scurcc. BS|, NS|
86
Iarlicianl-vise share in NSI I&O
lurnover for 2012-13 shovs lhal rorielary
lrades accounled for an average 46 ercenl
share in lhe lolaI lurnover (Charl 2.12). WhiIe
IIIs accounled for a share of 16 ercenl in lhe
lolaI lurnover, olhers calegory comrising
relaiI, HNIs, rivale and ubIic comanies
had an average share of 38 ercenl in lhe
lolaI lurnover. In lhe SI I &O lurnover,
rorielary lrades accounled for 76 ercenl
share foIIoved by olhers al 23 ercenl and
IIIs al one ercenl.
The arlicianl-vise share in nolionaI
vaIue oulslanding al NSI for lhe eriod
ending March 2013 is shovn in lhe charl 2.13
beIov:
87
B. Trend in Currency Derivatives Market
Currency fulures lrading commenced in
India on Augusl 29, 2008 al NSI. Laler, MCX-
SX and SI vere aIso granled ermission
on Oclober 7, 2008 and Oclober 8, 2008
resecliveIy lo slarl lrading in currency
derivalives. SubsequenlIy, SI has sloed
its operations in the currency derivatives
segmenl from AriI 7, 2010. On lhe olher
hand, lhe lhird exchange, USI slarled lhe
currency fulures lrading on Selember 20,
2010. During 2012-13, lolaI lurnover vas lhe
highesl al NSI (` 52,74,465 crore) foIIoved
by MCX-SX (` 33,03,179 crore) and USI
(` 1,32,861 crore) Iven lhough iniliaIIy onIy
USD-INR fulures vere lraded, currency
fulures segmenl vas exanded vilh lhe
inlroduclion of IURO: INR, GI: INR and
}IY: INR. A nev roducl, currency olions
vas inlroduced al NSI and USI from
Oclober 29, 2010. The currency olion vas
inlroduced on onIy USD-INR air. (TabIe
2.38)
The roducl-vise share in currency
derivalives voIume shovs lhal USD-INR
fulures dominaled vilh 76.4 ercenl foIIoved
by USD-INR olions (20.2 ercenl) . The
share of fulures on IUR-INR vas miniscuIe
1.7 ercenl foIIoved by }IY-INR fulures al 0.9
ercenl and GI-INR fulures al 0.8 ercenl.
(TabIe 2.39)
Table 2.38: Trends in the Currency Derivatives Segment
MCX-SX NSE USE
Month /
No. of Turnover Open No. of Turnover Open No. of Turnover Open
Year
Contracts (` crore) interest Contracts (` crore) interest Contracts (` crore) interest
Traded at the Traded at the Traded at the
end of end of end of
Month Month Month
(` crore) (` crore) (` crore)
1 2 3 4 5 6 7 8 9 10
2008-09 2,98,47,569 1,48,826 990 3,27,38,566 1,62,563 1,313 Na Na Na
2009-10 40,81,66,278 19,44,654 1,951 37,86,06,983 17,82,608 1,964 Na Na Na
2010-11 90,31,85,639 41,94,017 3,706 74,96,02,075 34,49,788 13,690 16,77,72,367 7,62,501 109
2011-12 77,03,25,229 37,32,446 4,494 97,33,44,132 46,74,990 15,328 31,53,95,543 14,88,978 125
2012-13 59,73,10,766 33,03,179 7,389 95,92,43,448 52,74,465 20,101 2,37,66,846 1,32,861 292
Ar-12 3,74,41,647 1,97,708 8,872 4,96,84,569 2,60,451 17,737 1,53,813 805 84
May-12 6,10,77,890 3,37,677 7,777 8,24,90,519 4,53,946 19,913 2,17,280 1,193 52
}un-12 4,77,19,536 2,71,484 7,788 6,96,24,353 3,93,619 19,918 2,11,741 1,191 61
}uI-12 5,30,17,417 2,97,670 6,754 8,36,11,989 4,67,274 18,388 3,08,518 1,768 56
Aug-12 3,72,98,269 2,09,916 7,373 5,87,15,174 3,28,907 18,694 2,23,442 1,290 44
Se-12 4,58,62,217 2,52,627 6,121 7,25,51,533 3,97,592 18,451 3,20,866 1,888 17
Ocl-12 5,42,58,177 2,91,772 7,091 9,48,60,746 5,07,426 18,825 5,33,788 2,950 40
Nov-12 4,71,19,095 2,62,790 7,989 8,45,15,590 4,67,875 25,176 4,78,086 2,639 50
Dec-12 4,34,28,753 2,42,176 7,861 8,11,64,915 4,48,753 22,872 33,03,565 18,385 64
}an-13 6,03,34,466 3,33,353 7,647 10,67,05,891 5,86,025 25,155 48,41,010 26,722 73
Ieb-13 5,21,60,471 2,87,002 8,107 9,10,17,848 4,97,277 26,399 50,19,579 27,374 319
Mar-13 5,75,92,828 3,19,004 7,389 8,43,00,321 4,65,320 20,101 81,55,158 46,657 292
Scurcc. MCX-SX, NS|, US|
88
Table 2.39: Product-wise market share in Currency Derivatives Volume
(Pcrccni)
USD-INR EURO-INR GBP-INR JPY-INR USD-INR
Futures Futures Futures Futures Options
2011-12 82.0 2.7 0.9 0.7 13.7
2012-13 76.4 1.7 0.8 0.9 20.2
Ar-12 82.6 1.6 1.0 0.7 14.2
May-12 82.9 1.3 0.7 0.4 14.7
}un-12 83.0 1.3 0.7 0.6 14.4
}uI-12 80.5 1.2 0.6 0.6 17.1
Aug-12 80.3 1.0 0.9 0.8 17.0
Se-12 76.8 1.4 0.9 0.7 20.2
Ocl-12 76.8 1.3 0.7 0.7 20.5
Nov-12 74.8 1.5 0.8 0.7 22.2
Dec-12 75.5 2.2 1.0 0.9 20.4
}an-13 71.4 2.3 0.9 1.2 24.2
Ieb-13 70.0 2.7 1.3 1.5 24.6
Mar-13 68.0 2.2 1.3 1.4 27.0
Scurcc. MCX-SX, NS|, US|
Table 2.40: Trends in Interest Rate Derivatives at NSE
Year/ Month
Total Open Interest at the end of the year / month
No. of Contracts Turnover (` crore) No. of Contracts Turnover (` crore)
1 2 3 4 5
2009-10 1,60,894 2,975 758 14
2010-11 3,348 62 1 0
2011-12 2,15,200 3,959 0 0
2012-13 12 0.22 0 0
Ar-12 11 0 0 0
May-12 1 0 0 0
}un-12 0 0 0 0
}uI-12 0 0 0 0
Aug-12 0 0 0 0
Sep-12 0 0 0 0
Oct-12 0 0 0 0
Nov-12 0 0 0 0
Dec-12 0 0 0 0
}an-13 0 0 0 0
Ieb-13 0 0 0 0
Mar-13 0 0 0 0
Scurcc. NS|
C. Trends in Interest Rates Derivatives
Trading in len year nolionaI couon
bearing Governmenl of India (GoI) bond
fulures slarled al NSI on Augusl 31, 2009.
Iurlher, inleresl rale fulures on 91 day
Governmenl of India (GoI) lreasury biIIs
(T-biIIs) slarled al NSI on }uIy 4, 2011. The
trends in turnover and open interest in
Inleresl Rale Derivalives (10 Year NolionaI
couon and 91 day T-biII bearing GoI bond
fulures) al NSI is deicled in TabIe 2.40.
During 2012-13, lhe lurnover in lhe inleresl
rale derivalive segmenl draslicaIIy decIined
to 0.2 crore in 2012-13.
89
3. TRENDS IN THE BOND MARKET
I. Corporate Bond Market
WeII deveIoed cororale bond markels
is cruciaI for a deveIoing counlry Iike India
lo augmenl lhe Iong lerm fund requiremenl
for firms and faciIilale lhe much needed
infraslruclure financing. The cororale
bond markel can aIso be aIlernalive source
of hnance by comIemenling lhe avaiIabIe
sources of fund raising for cororale Iike
banks and equily markels Iike India. Hilherlo,
Indian debt markets are dominated by the
government securities markets. In the recent
years, signihcanl oIicy auenlion has been
shovered lo revive and nurlure lhe grovlh
of lhe cororale bond markels in India. ul
lhough lhere have been signs of lhe markel
exanding, lhe share of cororale bond
markels in India remain reIaliveIy smaII vis-
a-vis Governmenl securilies markel as veII as
lhal of olher counlries .
Ma|orily of lhe lrades in cororale bond
markels haen over lhe counler. WhiIe
IIMMDA is lhe Iargesl reorling Ialform
for lhe OTC deaIs in lhe cororale bond
markel, SI and NSI serve as bolh lrading
and reorling Ialform. The number of lrades
reorled al IIMMDA had risen in 2012-13 lo
36,603 and lhe vaIue of lrades reorled aIso
rose by 26.9 ercenl lo ` 4,44,904 crore over
lhe revious hnanciaI year. During 2012-13,
lhe lolaI vaIue of lhe cororale bond lrades al
SI rose by 3.6 ercenl lo ` 51,622 crore from
` 49,842 crore in 2011-12. In NSI, lhe vaIue
of lrades for 2012-13 rose by 25.2 ercenl lo
` 2,42,105 crore from ` 1,93,435 crore in 2011-
12 (TabIe 2.41).
Wilh effecl from December 1, 2009,
il has been made mandalory for aII lrades
in cororale bonds belveen muluaI funds,
IIIs/sub-accounls, venlure cailaI funds,
foreign venlure cailaI inveslors, orlfoIio
managers, and RI reguIaled enlilies as
secihed by RI lo be cIeared and seuIed
lhrough lhe exchange cIearing cororalions,
NSCCL or ICCL. IRDA has aIso issued simiIar
direclions. The vaIue of cororale bond lrades
90
seuIed lhrough lhe cIearing cororalions has
increased by 19.0 ercenl lo ` 4,78,090 crore
in 2012-13 from ` 4,01,810 crore in 2011-12
(TabIe 2.42).
Table 2.41: Secondary Market: Corporate Bond Trades
Month /
BSE NSE FIMMDA Total
Year
Trades (` crore) Trades (` crore) Trades (` crore) Trades (` crore)
1 2 3 4 5 6 7 8 9
2008-09 8,327 37,320 4,902 49,505 9,501 61,535 22,730 1,48,361
2009-10 7,408 53,323 12,522 1,51,920 18,300 1,95,955 38,230 4,01,198
2010-11 4,465 39,581 8,006 1,55,951 31,589 4,09,742 44,060 6,05,274
2011-12 6,424 49,842 11,973 1,93,435 33,136 3,50,506 51,533 5,93,783
2012-13 8,639 51,622 21,141 2,42,105 36,603 4,44,904 66,383 7,38,632
Ar-12 472 2,664 1,232 12,155 1,977 21,219 3,681 36,038
May-12 632 1,904 1,342 14,220 2,140 22,389 4,114 38,512
}un-12 880 5,036 1,624 18,918 3,092 38,002 5,596 61,956
}uI-12 824 4,829 1,968 19,499 3,391 37,740 6,183 62,068
Aug-12 697 4,147 1,891 18,374 3,034 35,814 5,622 58,335
Se-12 720 4,802 2,051 23,373 3,244 41,029 6,015 69,205
Ocl-12 966 4,792 1,850 25,659 3,853 47,424 6,669 77,875
Nov-12 680 2,317 1,455 18,090 2,454 27,774 4,589 48,182
Dec-12 599 2,900 1,686 19,319 2,715 33,313 5,000 55,532
}an-13 838 6,533 2,702 31,349 4,517 56,873 8,057 94,755
Ieb-13 562 2,829 1,407 19,240 2,511 32,120 4,480 54,190
Mar-13 769 8,869 1,933 21,908 3,675 51,208 6,377 81,985
Tab!c 2.42: 5cu!cmcnt nI Cnrpnratc Bnnds
NSE BSE Total
Mnnth Nn. nI Tradcs 5cu!cd Va!uc Nn. nI Tradcs 5cu!cd Va!uc Nn. nI Tradcs 5cu!cd Va!uc
5cu!cd (` crnrc) 5cu!cd (` crnrc) 5cu!cd (` crore)
1 2 3 4 5 6 7
2009-10$ 8,922 1,20,006 464 5,482 9,386 1,25,488
2010-11 30,948 4,32,632 1,714 17,492 32,662 4,50,123
2011-12 34,697 3,91,120 2,916 10,680 37,613 4,01,800
2012-13 36,902 4,35,114 7,415 42,977 44,317 4,78,090
Ar-12 2,156 21,800 351 1,036 2,507 22,836
May-12 2,292 22,818 458 1,018 2,750 23,837
}un-12 3,315 39,800 452 1,087 3,767 40,888
}uI-12 3,676 38,140 432 2,053 4,108 40,194
Aug-12 2,972 34,463 554 3,081 3,526 37,544
Se-12 3,124 38,090 709 4,431 3,833 42,521
Ocl-12 3,708 47,144 891 4,250 4,599 51,394
Nov-12 2,468 26,349 656 2,845 3,124 29,195
Dec-12 2,638 32,163 696 4,050 3,334 36,213
}an-13 4,387 54,807 826 5,971 5,213 60,778
Ieb-13 2,558 31,783 536 3,634 3,094 35,418
Mar-13 3,608 47,755 854 9,518 4,462 57,273
$ in!icaics (Occcn|cr 2009- Marcn 2010)
91
II. Wholesale Debt Market
During 2012-13, lurnover in lhe WhoIesaIe
Debl Markel (WDM) segmenl increased lo
` 7,92,214 crore from ` 6,33,179 crore in 2011-
12. The nel lraded vaIue for lhe WDM segmenl
increased by 25.1 ercenl in lhe hnanciaI year.
Hovever, lhe average lraded vaIue decIined
by 15.1 ercenl (TabIe 2.43). AIso, lhe number
of lrades increased by 67.5 ercenl lo 39,280 in
2012-13 from 23,447 in 2011-12. The nel lraded
vaIue increased subslanliaIIy in lhe second haIf
of lhe hnanciaI year. The highesl lurnover vas
recorded in }anuary 2013 (` 1,03,426 crore)
foIIoved by March 2013 (` 76,136 crore) and
}une 2012 (` 72,348 crore). Number of lrades
vas lhe highesl for }anuary 2013 foIIoved by
March 2013.
Nolvilhslanding lhe rogressive decIine
of G-Sec share in lhe share of inslrumenls
lraded, G-sec sliII is lhe mosl dominanl
roducl in lhe WDM segmenl. The share of
G-sec in lhe lraded vaIue vas 51.6 ercenl in
2012-13 (TabIe 2.44). The share of Treasury
Table 2.43: Business Growth on the
Wholesale Debt Market
Segment of NSE
No. of Net Traded Average
Month/Year Trades Value Daily
(`crnrc) Tradcd
Value
(`crnrc)
1 2 3 4
2008-09 16,129 3,35,950 1,419
2009-10 24,069 5,63,816 2,359
2010-11 20,383 5,59,447 2,256
2011-12 23,447 6,33,179 2,649
2012-13 39,280 7,92,214 2,248
Ar-12 2,652 47,743 1,700
May-12 2,315 50,941 2,078
}un-12 3,445 72,348 2,576
}uI-12 3,009 66,187 2,416
Aug-12 2,316 48,626 1,930
Se-12 3,754 71,327 2,648
Ocl-12 3,349 66,986 2,376
Nov-12 2,703 51,361 1,721
Dec-12 3,599 71,980 2,208
}an-13 4,701 1,03,426 3,584
Ieb-13 3,429 65,154 1,819
Mar-13 4,007 76,136 1,918
Scurcc. NS|
Table 2.44: Instrument-wise Share of Securities Traded in the Wholesale Debt Market Segment of NSE
(Pcrccni)
Month/ Year Govt. Dated Securities Treasury Bills PSU / Institutional Bonds Others
1 2 3 4 5
2008-09 69.7 16.9 8.9 4.4
2009-10 58.2 16.5 15.4 10.0
2010-11 54.5 17.6 19.6 8.3
2011-12 50.4 22.0 19.6 8.0
2012-13 51.6 23.7 16.3 8.3
Ar-12 44.7 36.1 11.3 7.9
May-12 51.3 27.0 14.8 6.9
}un-12 55.2 24.0 14.3 6.5
}uI-12 52.4 24.1 16.1 7.5
Aug-12 38.4 30.5 22.2 8.9
Se-12 49.8 21.7 20.3 8.2
Ocl-12 53.2 14.7 20.9 11.3
Nov-12 41.7 29.5 19.4 9.4
Dec-12 55.9 22.8 13.3 8.0
}an-13 59.8 15.2 14.8 10.2
Ieb-13 61.9 15.5 15.0 7.6
Mar-13 55.5 23.7 13.3 7.6
Scurcc. NS|
92
4. MUTUAL FUNDS
GI obaI I y, mul uaI f unds as an
inlermedialion mechanism have a unique
roIe in lhe assel managemenl induslry.
Across lhe vorId, muluaI funds Iay an
imorlanl roIe in managing lhe reliremenl
assels. This is arlicuIarIy so in counlries
Iike USA, AuslraIia, UK elc. In India, muluaI
funds have evoIved signihcanlIy over lhe asl
decade. They are a vilaI arl of lhe bouquel
of channeIs lo romole hnanciaI incIusion
and hnanciaI arlicialion. Nolvilhslanding
lhe rogress made in lhe asl, lhere is a
significanl scoe for furlher exansion
of lhe induslry as shovn by a cross-
counlry comarison of AUM-GDI ralio
(Charl 2.15).
biIIs increased from 22.0 ercenl in 2011-12 lo
23.7 ercenl in 2012-13. The ercenlage share
of ISU/ inslilulionaI bonds and 'olhers' vhich
incIude mainIy cororale debl securilies,
remained aImosl lhe same as in lhe revious
hnanciaI year, al 16.3 ercenl and 8.3 ercenl
resecliveIy.
Trading members dominaled lhe WDM
segmenl vilh a share of 53.4 ercenl in lolaI
lurnover in 2012-13 as comared lo 53.3
ercenl in 2011-12 (TabIe 2.45). The share of
hnanciaI inslilulions/muluaI funds/cororale
vas 4.3 ercenl in 2012-13 from 4.2 ercenl
in 2011-12. WhiIe lhe share of Indian banks
marginaIIy increased lo 16.5 ercenl in 2012-13,
lhal of, foreign banks decIined lo 22.1 ercenl
over the previous year.
Table 2.45: Share of Participants in Turnover of Wholesale Debt Market Segment of NSE
(Pcrccni)
Month Trading Fls / MFs / Primary Indian Foreign
Members Corporates Dealers Banks Banks
1 2 3 4 5 6
2008-09 44.7 3.4 6.6 18.1 27.3
2009-10 49.2 2.6 4.6 19.8 23.7
2010-11 53.5 2.4 4.2 13.1 26.8
2011-12 53.3 4.2 3.7 16.4 22.5
2012-13 53.4 4.3 3.7 16.5 22.1
Ar-12 50.0 3.0 4.4 19.0 23.6
May-12 51.9 4.4 4.5 18.2 21.0
}un-12 51.1 5.5 4.6 16.0 22.8
}uI-12 54.6 4.1 2.8 15.6 22.8
Aug-12 54.5 3.2 2.7 12.7 27.0
Se-12 52.1 4.2 3.0 18.6 22.2
Ocl-12 53.8 4.5 3.8 13.1 24.8
Nov-12 51.4 4.5 3.8 15.9 24.4
Dec-12 55.0 4.1 3.9 15.1 21.9
}an-13 52.7 7.2 4.1 17.8 18.2
Ieb-13 55.9 2.8 3.4 16.9 21.0
Mar-13 56.1 2.7 3.4 18.0 19.7
Scurcc. NS|
93
Afler a ga of lvo years, lhe muluaI
fund induslry in India vilnessed a osilive
grovlh in lhe resource mobiIisalion and
assels under managemenl. Since 2009-10,
lhe nel inovs and AUM had conlinuousIy
decIined. The gross mobiIisalion of resources
by aII muluaI funds during 2012-13 vas al
` 72,67,885 crore comared lo ` 68,19,678
crore during the previous year indicating an
increase of 6.6 ercenl over lhe revious year
(TabIe 2.46). CorresondingIy, redemlion
aIso increased by 5.1 ercenl lo ` 71,91,346
crore in 2012-13 from ` 68,41,702 crore in
2011-12. The nel resources mobiIised by aII
Table 2.46: Mobilisation of Resources by Mutual Funds
(` crcrc)
Pcrind Grnss Mnbi!isatinn Rcdcmptinn Nct Innw Asscts at thc cnd nI
period
1 2 3 4 5
1999-00 61,241 42,271 18,970 1,07,946
2000-01 92,957 83,829 9,128 90,587
2001-02 1,64,523 1,57,348 7,175 1,00,594
2002-03 3,14,706 3,10,510 4,196 1,09,299
2003-04 5,90,190 5,43,381 46,808 1,39,616
2004-05 8,39,708 8,37,508 2,200 1,49,600
2005-06 10,98,149 10,45,370 52,779 2,31,862
2006-07 19,38,493 18,44,508 93,985 3,26,292
2007-08 44,64,376 43,10,575 1,53,802 5,05,152
2008-09 54,26,353 54,54,650 -28,296 4,17,300
2009-10 1,00,19,022 99,35,942 83,080 6,31,979
2010-11 88,59,515 89,08,921 -49,406 5,92,250
2011-12 68,19,678 68,41,702 -22,024 5,87,217
2012-13 72,67,885 71,91,346 76,539 7,01,443
94
lhe muluaI funds aggregaled lo ` 76,539
crore in 2012-13 comared lo nel oulov of
` 22,024 crore in 2011-12.
As al lhe end of March 2013, lhe
cumuIalive nel assels managed by aII lhe
muluaI funds lolaIed lo ` 7,01,443 crore as
against ` 5,87,217 crore al lhe end of March
2012, reresenling a rise 19.5 ercenl.
Sector-wise Resource Mobilisation
The rivale seclor muluaI funds
relained lhe dominanl Iace in lhe muluaI
fund induslry vilh 81.6 ercenl share in
lhe gross resource mobiIisalion and 85.1
ercenl in lhe nel resource mobiIisalion. The
corresonding shares of UTI muluaI fund
and olher ubIic seclor muluaI funds vas 8.7
ercenl and 9.7 ercenl in lhe gross resource
mobiIisalion and 6 ercenl and 8.9 ercenl in
lhe nel resource mobiIisalion.
In absoIule lerms, lhe gross resource
mobiIisalion by rivale seclor muluaI funds
rose by 4.3 ercenl lo ` 59,27,947 crore in
2012-13 from ` 56,83,744 crore in 2011-12
(TabIe 2.47). The nel resource mobiIisalion
by rivale seclor muluaI funds increased by
521.5 ercenl lo ` 65,102 crore in 2012-13
as againsl a nel oulov of ` 15,446 crore
recorded in 2011-12. The net resources raised
by UTI muluaI fund and olher ubIic seclor
muluaI funds vas much Iesser al ` 4,629
crore and ` 6,808 crore in 2012-13, even
lhough il reresenled a rise of 245.4 er
cenl and 300.6 ercenl resecliveIy over lhe
previous year.
The cIose-ended schemes of rivale
and ubIic seclor muluaI funds vilnessed
nel oulovs during lhe year. NeverlheIess,
lhe cIose-ended schemes heId a miniscuIe
share in lhe gross resources mobiIised by
rivale and ubIic seclor muluaI funds al 0.99
ercenl and 1.2 ercenl resecliveIy.
Scheme-vise allern reveaIs lhal nel
infIovs vere osilive for aII lhe scheme
calegories excel grovlh/equily orienled
schemes, Iain ITIs and IoI schemes.
The huge redemlion ressure in grovlh
schemes had resuIled in Iargesl nel oulovs
amounting to ` 14,587 crore during lhe year
(TabIe 2.48). Iixed income schemes regislered
lhe highesl nel inovs amounling lo ` 90,183
crore indicaling increase of 451.5 ercenl over
the previous year. The highest percentage
rise in lhe nel resource mobiIisalion vas in
giIl schemes vhich vilnessed a nel inov
of ` 3,975 crore in 2012-13 comared lo nel
oulov of ` 20 crore in the previous year.
The nel inovs inlo debl schemes consliluled
Table 2.47: Sector-wise Resource Mobilisation by Mutual Funds during 2012-13
(` crcrc)
Particulars
Private Sector MFs Public Sector MFs UTI MF Grand
Open- Close- Interval Total Open- Close- Interval Total Open- Close- Interval Total
Total
ended ended ended ended ended ended
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Mobilisation 58,62,749 58,175 7,022 59,27,947 6,98,358 8,230 0 7,06,589 6,26,821 5,641 888 6,33,350 72,67,885
of Funds (55,59,558) (1,15,116) (9,069) (56,83,744) (5,96,696) (15,695) (1,091) (6,13,482) (5,14,272) (4,702) (3,479) (5,22,453) (68,19,679)
Repurchases / 57,76,161 80,387 6,297 58,62,845 6,86,483 13,131 166 6,99,781 6,21,562 5,067 2,092 6,28,720 71,91,346
Redemption (55,67,914) (1,13,318) (17,957) (56,99,189) (6,01,662) (13,926) (1,289) (6,16,877) (5,15,947) (4,829) (4861) (5,25,637) (68,41,702)
Nct Innw / 86,588 -22,212 725 65,102 11,875 -4,901 -166 6,808 5,259 574 -1,204 4,629 76,539
Outnw nI (-8,356) (1,799) (-8,888) (-15,446) (-4,965) (1,769) (-198) (-3,394) (-1,675) (-126) (-1,382) (-3,184) (-22,024)
Funds
Ncic. |igurcs in parcnincscs in!icaic ccrrcspcn!ing gurcs jcr 2011-12
95
lhe Iions' share of 92.0 ercenl in lhe inovs
inlo hxed income schemes. Iven lhough goId
has emerged as one of lhe mosl arecialing
assel since 2008, GITI schemes exeriences a
decIine in lhe nel inovs lo lhe lune of 61.2
percent compared to the previous year. This
is nolvilhslanding lhe rise in AUM of GITIs
lo lhe exlenl of 17.8 ercenl in 2012-13 over
lhe revious hnanciaI year.
The assels under managemenl (AUM)
had been vilnessing a decIining lrend since
2009-10. The AUM increased by 19.5 ercenl
to ` 7,01,443 crore al lhe end of March 2013
from ` 5,87,217 crore a year ago. The AUM
vas lhe highesl for income/debl orienled
schemes at ` 4,97,451 crore vhiIe lhe AUM
under grovlh/equily orienled scheme vas
` 1,72,508 crore. In lerms of grovlh in AUM,
GiIl schemes (120.7 ercenl) achieved lhe
highesl increase foIIoved by debl schemes
(36.2 ercenl) and GITI schemes (17.8
ercenl) during lhe year. In consonance
vilh nel oulovs, grovlh in AUM vas aIso
negalive for grovlh schemes, IIain ITIs and
IoI schemes. The highesl decIine in AUM
vas regislered for lhe IoI schemes invesling
overseas al 18.9 ercenl.
Table 2.48: Scheme-wise Resource Mobilisation and Assets under Management by Mutual
Funds as on March 29, 2013
Nn. nI Grnss Funds Rcpurchasc/ Nct Innw/ Asscts Undcr Pcrccntagc
5chcmcs Mnbi!iscd Rcdcmptinn Outnw nI Managcmcnt Variatinn
Schemes (` crore) (` crore) Funds as on March over March
(` crore) 31, 2013 30, 2012
(` crore)
1 2 3 4 5 6 7
A. Income/ Debt Oriented Schemes
i) Liquid/Money Markel 55 63,65,420 63,62,194 3,226 93,392 16.2
ii) GiIl 42 12,886 8,910 3,975 8,074 120.7
iii) Debl (olher lhan 760 8,35,273 7,52,292 82,981 3,95,985 36.2
assured relurns)
Subtotal (i+ii+iii) 857 72,13,578 71,23,396 90,183 4,97,451 32.7
B. Growth/ Equity Oriented Schemes
i) ILSS 50 2,641 4,282 -1,641 22,746 -3.8
ii) Olhers 297 40,723 53,669 -12,946 1,49,762 -5.5
Subtotal (i+ii) 347 43,364 57,951 -14,587 1,72,508 -5.3
C. Balanced Schemes
aIanced schemes 32 5,205 4,989 216 16,307 0.3
D. Exchange Traded Fund
i) GoId ITI 14 2,767 1,353 1,414 11,648 17.8
ii) Olher ITIs 23 2,285 2,497 -212 1,477 -8.1
Subtotal (i+ii) 37 5,052 3,850 1,202 13,124 14.2
E. Fund of Funds Investing Overseas
Iund of Iunds 21 686 1,160 -474 2,053 -18.9
investing overseas
TOTAL (A+B+C+D+E) 1,294 72,67,885 71,91,346 76,539 7,01,443 19.45
Ncic. Nci Asscis cj ` 6332.69 crcrc pcriaining ic |un! cj |un!s (!cncsiic) as cn Marcn 29, 2013 is nci inc|u!c! in inc a|ctc
!aia.
96
As on March 29, 2013, lhere vere 1,294
muluaI fund schemes of vhich, 857 vere
income/debl orienled schemes, 347 vere
grovlh/equily orienled schemes and 32 vere
baIanced schemes (TabIe 2.49). In addilion,
lhere vere 37 Ixchange Traded Iunds, of
vhich 14 vere GoId ITIs and 23 olher ITIs.
AIso, lhere vere 21 schemes oeraling as
Iund of Iunds vhich invesled in overseas
securilies. Malurily-vise lhere vere 751 oen-
ended schemes and 501 cIose-ended schemes
as on March 29, 2013. Ior lhe income/debl
orienled schemes calegory, lhe number of
cIose-ended schemes exceeded oen-ended
schemes.
HisloricaIIy, muluaI funds have been
dominant investors in the debt market than
Table 2.49: Number of Schemes by Investment Objective as on March 29, 2013
Schemes Open-ended Close-ended Interval Total
1 2 3 4 5
A. Income/ Debt Oriented Schemes
i) Liquid/ Money Markel 55 0 0 55
(55) (0) (0) (55)
ii) GiIl 42 0 0 42
(42) (0) (0) (42)
iii) Debl (olher lhan assured relurns) 237 481 42 760
(229) (512) (34) (775)
iv) Debl (assured relurns) 0 0 0 0
Subtotal (i+ii+iii) 334 481 42 857
(326) (512) (34) (872)
B. Growth/ Equity Oriented Schemes
i) ILSS 36 14 0 50
(36) (13) (0) (49)
ii) Olhers 292 5 0 297
(299) (4) (0) (303)
Subtotal (i+ii) 328 19 0 347
(335) (17) (0) (352)
C. Balanced Schemes
aIanced schemes 31 1 0 32
(29) (1) (0) (30)
D. Exchange Traded Fund
i) GoId ITI 14 0 0 14
(14) (0) (0) (14)
ii) Olher ITIs 23 0 0 23
(21) (0) (0) (21)
Subtotal (i+ii) 37 0 0 37
(35) (0) (0) (35)
E. Fund of Funds Investing Overseas
Iund of Iunds invesling overseas 21 0 0 21
(20) (0) (0) (20)
TOTAL (A+B+C+D+E) 751 501 42 1294
(745) (530) (34) (1309)
Ncic. |igurcs in parcnincscs in!icaic ccrrcspcn!ing gurcs jcr 2011-12
97
equily markels. During 2012-13, lhe combined
nel inveslmenls by lhe muluaI funds in debl
and equily vas ` 4,50,711 crore comared
to ` 3,33,463 crore in 2011-12, accounling an
increase of 35.2 ercenl (TabIe 2.50). MuluaI
Iunds vere nel seIIers in equily segmenl
lo lhe lune of ` 22,749 crore, vhereas, lheir
net investments in the debt segment rose
to ` 4,73,460 crore during lhe same eriod.
Since 2009-10, on an yearIy basis lhere has
been ooading of inveslmenls by muluaI
funds from lhe equily markel. Inveslmenls
in lhe debl segmenl vas lhe highesl in }une
2012 (` 78,465 crore) foIIoved by March 2013
(` 68,114 crore). WhiIe lheir nel inveslmenls
in lhe debl segmenl vere osilive for aII lhe
monlhs during lhe year, lhal in lhe equily
segmenl vas negalive for aII monlhs excel
}une 2012.
Unit hn!ding paucrn
India has a high househoId saving ralio.
ul lhe muluaI funds have nol been abIe
lo make a rofound imacl in channeIizing
lhese savings from lhe househoIds lo lhe
securities market.
As on March 31, 2013, vhiIe individuaIs
subscribed 96.9 ercenl of lhe lolaI foIios, lheir
share in lhe lolaI nel assels vas 45.7 ercenl
(TabIe 2.51). On lhe olher hand, cororale/
inslilulions had a miniscuIe share of 1.2
ercenl in lhe lolaI number of foIios, lheir
share in lhe lolaI nel assels vas a sizeabIe 48.6
ercenl. In comarison lo 2011-12, lhe share
of cororale in lhe lolaI nel assels increased
vhiIe lheir share in foIios had decIined. NRIs/
OCs vilh 1.8 ercenl share in foIios had 4.7
ercenl share in lolaI nel assels.
Table 2.50: Trends in Transactions on Stock Exchanges by Mutual Funds
(` crcrc)
Equity Debt Total
Period Gross Gross Net Gross Gross Net Gross Gross Net
Purchase Sales Purchase/ Purchase Sales Purchase/ Purchase Sales Purchase/
Sales Sales Sales
1 2 3 4 5 6 7 8 9 10
2008-09 1,44,069 1,37,085 6,985 3,27,744 2,45,942 81,803 4,71,814 3,83,026 88,787
2009-10 1,95,662 2,06,173 -10,512 6,24,314 4,43,728 1,80,588 8,19,976 6,49,901 1,70,076
2010-11 1,54,217 1,74,018 -19,802 7,62,644 5,13,493 2,49,153 9,16,861 6,87,511 2,29,352
2011-12 1,32,137 1,33,494 -1,358 11,16,760 7,81,940 3,34,820 12,48,897 9,15,434 3,33,463
2012-13 1,13,758 1,36,507 -22,749 15,23,393 10,49,934 4,73,460 16,37,150 11,86,440 4,50,711
Ar-12 9,054 9,593 -539 1,04,747 67,618 37,129 1,13,801 77,211 36,590
May-12 8,872 9,270 -398 94,500 70,941 23,559 1,03,371 80,210 23,161
}un-12 9,268 8,972 296 1,50,701 72,235 78,465 1,59,969 81,208 78,761
}uI-12 9,008 10,997 -1,988 1,03,709 1,00,725 2,985 1,12,717 1,11,721 997
Aug-12 9,671 11,302 -1,631 1,05,248 76,385 28,863 1,14,919 87,687 27,232
Se-12 10,427 13,626 -3,199 1,25,205 75,096 50,110 1,35,633 88,722 46,911
Ocl-12 9,059 11,579 -2,520 94,503 77,505 16,998 1,03,561 89,083 14,478
Nov-12 8,249 10,646 -2,397 1,09,560 66,692 42,868 1,17,809 77,338 40,471
Dec-12 9,978 12,677 -2,699 1,35,115 91,490 43,625 1,45,093 1,04,167 40,926
}an-13 12,010 17,223 -5,212 1,46,459 1,05,807 40,652 1,58,469 1,23,030 35,439
Ieb-13 10,286 11,134 -848 1,28,317 88,225 40,092 1,38,603 99,359 39,244
Mar-13 7,876 9,490 -1,614 2,25,330 1,57,217 68,114 2,33,207 1,66,706 66,501
98
A secloraI breaku of lhe rivale seclor
and ubIic seclor muluaI funds indicales lhe
dominalion of rivale seclor muluaI funds
in lerms of share in lolaI foIios and lolaI nel
assels. WhiIe lhe rivale seclor muluaI funds
had 65.2 ercenl share in lolaI foIios, lhe
corresonding share of ubIic seclor muluaI
funds vas 34.8 ercenl as al lhe end of March
2013 (TabIe 2.52). The share of rivale seclor
muluaI funds in lolaI nel assels vas 82.6
ercenl for lhe rivale seclor muluaI funds
comared lo 17.4 ercenl for ubIic seclor
muluaI funds.
5. PORTFOLIO MANAGEMENT
WeaIlh managemenl induslry in India
is sleadiIy groving vilh lhe rise in number
of HNIs and veaIlh. This is evidenl in lhe
exanding cIienleIe base of lhe orlfoIio
managemenl induslry. Hovever, lhe recenl
economic dovnlurn and crisis had ils imacl
on lhe orlfoIio managemenl aclivilies.
The lolaI number of cIienls has decIined
lo 66,585 in 2012-13 from 80,608 in 2011-12
(TabIe 2.53). WhiIe lhe number of cIienls
taking discretionary and non-discretionary
services decIined, lhose oling for advisory
services increased in 2012-13. Among lhe
cIienleIe base, lhe dominanl grou is lhose
laking discrelionary services vho conslilule
76.5 ercenl of lhe lolaI number of cIienls.
The assels under managemenl of lhe
orlfoIio managemenl induslry hovever
rose by 17.3 ercenl lo ` 6,05,990 crore in
Tab!c 2.51: Unit hn!ding paucrn nI a!!
mutual funds as on March 31,
2013
Percentage Percentage
Category to Total to Total
Folios Net Assets
1 2 3
IndividuaIs 96.94 45.73
(94.5) (48.2)
NRIs/OCs 1.84 4.70
(1.9) (6)
IIIs 0.00 0.96
(0.0) (0.9)
Cororales/Inslilulions/ 1.22 48.61
Olhers (3.6) (44.9)
Total 100.00 100.00
Tab!c 2.52: Unit hn!ding paucrn nI privatc scctnr and pub!ic scctnr mutua! Iunds as nn
March 31, 2013
Category
Percentage to Percentage to
Total Folios Total Net Assets
1 2 3
1 Private Sector Mutual Fund 65.21 82.60
NRIs/OCs 1.53 4.15
IIIs 0.00 0.96
Cororales/Inslilulions/Olhers 1.09 40.29
2 Public Sector Mutual Funds 34.79 17.40
(including UTI Mutual Fund)
NRIs/OCs 0.30 0.54
IIIs 0.00 0.00
Cororales/Inslilulions/Olhers 0.13 8.32
Total (1+2) 100 100
99
2012-13 from ` 5,16,448 crore in 2011-12. The
discrelionary services imarled lo IIIO/IIs
consliluled 82.5 ercenl of lhe lolaI assels
under managemenl of lhe orlfoIio managers,
foIIoved by advisory services al 13.2 ercenl.
The AUM of discrelionary orlfoIio managers
managing IIIO/II funds increased by 29.4
percent in 2012-13 over the previous year. The
AUM/GDI ralio of orlfoIio managers vas
6.04 ercenl in 2012-13 vhiIe lhal of muluaI
fund of induslry vas 7.0 ercenl, indicaling
lhe near comarabIe IeveIs of assels managed
by both sectors.
6. FOREIGN INSTITUTIONAL
INVESTMENT
Suslained cailaI inovs -orlfoIio and
direcl - is a sine qua non for any economy.
The ersislence of high currenl accounl dehcil
in India underscores lhe dire need for cailaI
inovs. Reinvigoraled foreign inslilulionaI
inovs lo lhe emerging markels Iike India
in lhe vake of Iuro area concerns boosled
Iiquidily and assel rices. The chaIIenge is
arlicuIarIy lo creale favourabIe condilions
for a conlinuous inov of foreign cailaI,
relaining il and uliIising lhem for roduclive
uroses Iike infraslruclure and olher
investments needs.
III fIovs inlo India have grovn
remarkabIy since 2009-10. In 2012-13, India
received a lolaI nel III inov of ` 1,68,367
crore compared to ` 93,725 crore in 2011-12,
shoving a rise of 79.6 ercenl. This vas lhe
highesl nel III inov in ruee lerms in any
year since lhe IIIs vere aIIoved lo invesl
in Indian markels. In US doIIar lerms, lhe
nel inov amounled lo US$ 31,047 miIIion
in 2012-13. The combined gross purchases
of debl and equily by IIIs decIined by 1.8
percent to ` 9,04,845 crore in 2012-13 from
` 9,21,285 crore in 2011-12 (TabIe 2.54). The
combined gross saIes by IIIs decIined by 11.0
percent to ` 7,36,481 crore from ` 8,27,562
crore during the same period in previous
year. The cumuIalive nel inveslmenl of IIIs
in Indian markels amounled lo USD 171,529
miIIion as al lhe end of March 2013 comared
lo USD 140,482 miIIion in 2011-12, indicaling
a rise of 22.1 ercenl.
The comosilion of nel III inovs shovs
lhal ma|orily of lhe III inovs are invesled
in equily markels. This has been lhe lrend
over lhe years excel 2011-12. In 2012-13, lhe
nel III inovs inlo equily segmenl increased
by 220.1 percent to ` 1,40,033 crore from
` 43,738 crore in 2011-12 (TabIe 2.55). In lhe
debl segmenl, lhe nel III inovs decIined by
43.3 ercenl lo ` 28,334 crore in 2012-13 from
` 49,988 crore in 2011-12.
The nel III inveslmenl vas lhe highesl in
lhe Iasl quarler of lhe hnanciaI year. III vas
lhe highesl for lhe monlh of Iebruary 2013
(` 28,441 crore) foIIoved by December 2012
(` 26,792 crore) and }anuary 2013(` 25,006
crore). In aII lhese monlhs, lhe dominanl
Table 2.53: Assets Managed by Portfolio Managers
No. of Clients AUM (` crore)
Discretio- Non- Advisory Total Discretio- Discretio- Non- Advisory Total
nary Discretio- nary nary Discretio-
nary (EPFO/ (Non nary
PFs) EPFO/PFs)
2009-10 54,520 3,771 5,734 64,025 Na 2,73,420 9,301 Na Na
2010-11 69,691 3,748 8,770 82,209 Na 2,84,980 10,456 86,016 Na
2011-12 65,600 5,712 9,296 80,608 3,86,410 37,365 18,759 73,914 5,16,448
2012-13 50,937 4,461 11,187 66,585 4,99,851 36,864 26,298 79,841 6,05,990
100
Table 2.54: Investment by Foreign Institutional lnvestors
Gross Purchase Gross Sales Net Net Cumulative
Year (` crore) (` crore) Investment Investment Investment
(` crore) (USD mn.) (USD mn.)
1 2 3 4 5 6
1992-93 18 4 13 4 4
1993-94 5,593 467 5,127 1,634 1,638
1994-95 7,631 2,835 4,796 1,528 3,167
1995-96 9,694 2,752 6,942 2,036 5,202
1996-97 15,554 6,980 8,575 2,432 7,635
1997-98 18,695 12,737 5,958 1,650 9,285
1998-99 16,116 17,699 -1,584 -386 8,899
1999-00 56,857 46,735 10,122 2,474 11,373
2000-01 74,051 64,118 9,933 2,160 13,532
2001-02 50,071 41,308 8,763 1,839 15,372
2002-03 47,062 44,372 2,689 566 15,937
2003-04 1,44,855 99,091 45,764 10,005 25,943
2004-05 2,16,951 1,71,071 45,880 10,352 36,294
2005-06 3,46,976 3,05,509 41,467 9,363 45,657
2006-07 5,20,506 4,89,665 30,841 6,820 52,477
2007-08 9,48,018 8,81,839 66,179 16,442 68,919
2008-09 6,14,576 6,60,386 -45,811 -9,837 59,081
2009-10 8,46,438 7,03,780 1,42,658 30,251 89,333
2010-11 9,92,599 8,46,161 1,46,438 32,226 1,21,559
2011-12 9,21,285 8,27,562 93,725 18,923 1,40,482
2012-13 9,04,845 7,36,481 1,68,367 31,047 1,71,529
Table 2.55: Investments by Mutual Funds and Foreign Institutional lnvestors
(` crcrc)
Net Investment by Mutual Funds Net Investment by Flls
Year / Month
Equity Debt Total Equity Debt Total
1 2 3 4 5 6 7
2008-09 6,984 81,803 88,787 -47,706 1,895 -45,811
2009-10 -10,512 1,80,588 1,70,076 1,10,220 32,438 1,42,658
2010-11 -19,802 2,49,153 2,29,352 1,10,121 36,317 1,46,438
2011-12 -1,358 3,34,820 3,33,463 43,738 49,988 93,725
2012-13 -22,749 4,73,460 4,50,711 1,40,033 28,334 1,68,367
Ar-12 -539 37,129 36,590 -1,109 -3,788 -4,897
May-12 -398 23,559 23,161 -347 3,569 3,222
}un-12 296 78,465 78,761 -501 1,682 1,181
}uI-12 -1,988 2,985 997 10,273 3,392 13,664
Aug-12 -1,631 28,863 27,232 10,804 265 11,069
Se-12 -3,199 50,110 46,911 19,262 623 19,884
Ocl-12 -2,520 16,998 14,478 11,364 7,852 19,216
Nov-12 -2,397 42,868 40,471 9,577 292 9,869
Dec-12 -2,699 43,625 40,926 24,464 1,704 26,792
}an-13 -5,212 40,652 35,439 22,059 2,947 25,006
Ieb-13 -848 40,092 39,244 24,439 4,001 28,441
Mar-13 -1,614 68,114 66,501 9,124 5,795 14,919
101
share of III inveslmenl vas in equily markels
viz., 85.9 ercenl, 91.3 ercenl and 88.2
ercenl resecliveIy. In lhe debl segmenl
loo, nel inovs vere lhe highesl in lhe Iasl
quarler of 2012-13. ul monlh-vise, lhe nel
inovs inlo lhe debl segmenl vas lhe highesl
in Oclober 2012 (` 7,852 core) foIIoved by
March 2013 (` 5,795 crore), and Iebruary
2013 (` 4,001 crore)
A comarison of III nel inovs and
muluaI fund nel inovs in lhe equily and
debl segmenl shovs lhe conlrarian inveslmenl
osilions. MuluaI funds lradilionaIIy invesl
mosl in debl segmenl vhiIe IIIs moslIy are
heavy inveslors in lhe equily segmenl. This
comarison is shovn in TabIe 2.55.
Iursuanl lo lhe udgel Announcemenl
2012-13, QuaIihed Ioreign Inveslors (QIIs)
have been aIIoved lo access Indian Cororale
ond markel. QII can invesl in cororale debl
securilies (vilhoul any Iock-in or residuaI
malurily cIause) and MuluaI Iund debl
schemes ulo USD 1 biIIion. The dehnilion
of QII has been exanded lo aIso incIude
residenls of lhe member counlries of GuIf
Co-oeralion CounciI (GCC) and Iuroean
Commission.
The lolaI nel inveslmenl of QIIs in
equily and cororale debl, vas ` 692 crore
and ` 473 crore resecliveIy in 2012-13. In
US $miIIion lerms, lhis reresenled USD
127 miIIion and USD 87 miIIion resecliveIy
(TabIe 2.56).
The debl inveslmenl Iimils rescribed
for IIIs and subaccounls for 2012-13 is given
in TabIe 2.57:
Table 2.56: QFI Investments during 2012-13
Gross Gross Net Net Cumulative
Year Instrument Purchase Sales Investment Investment Investment
(` crore) (` crore) (` crore) (US $ mn.) * (US $ mn.)
2012-13
Iquily 695 3 692 127 N.A.
Cororale
478 5 473 87 N.A.
Debt
|B| rcjcrcncc raic as cn Marcn 28, 2013 jrcn |B| uc|siic. (1 US $ ` 54.3893).
Table 2.57: Allocation of Debt Investment limits to FIIs and Sub-accounts during 2012-13
(` crcrc)
Date Govt. Debt Old Govt. Debt Long Corporate Corporate Debt Corporate Debt
Term Debt Old Long Term Infra Long Term
AriI 23, 2012 1,203 1,321 4,547 Na Na
May 21, 2012 3,028 1,875 3,929 Na Na
}une 20, 2012 1,464 2,437 1,599 6,381 Na
}uIy 04, 2012 Na 20,469 Na 19,777 Na
}uIy 20, 2012 1,264 3,669 4,357 4,219 Na
Augusl 21, 2012 2,275 4,698 4,591 2,132 Na
Selember 20, 2012 13,255 3,736 5,794 Na
Oclober 22, 2012 2,442 12,035 4,053 4,247 Na
November 20, 2012 1,094 4,451 5,071 Na Na
December 20, 2012 1,985 10,264 4,301 Na Na
}anuary 21, 2013 13,707 3,954 Na Na
Iebruary 20, 2013 1,919 33,959 3,866 Na 26,925
March 20, 2013 1,061 9,847 5,331 Na Na
102
The foIIoving TabIe 2.58 rovides a
gIimse of lhe debl uliIisalion slalus as on
March 31, 2013.
The IIIs vere ermiued lo lrade in lhe
derivalives markel since Iebruary 2002. .The
nolionaI vaIue of oen inleresl heId by IIIs
in derivalives vas ` 17,38,526 crore as on
March 31, 2013 as comared lo ` 20,19,367
crore as on March 31, 2012. Oen inleresl
osilion of IIIs in index olions vas lhe
highest at ` 10,10,032 crore by end-March
2013, foIIoved by Slock fulures (` 4,77,993
crore), Index fulures (` 1,99,621 crore) and
Slock olions (` 50,879 crore) (TabIe 2.59).
Iarlicialory Noles are a ma|or conduil
of channeIizing oshore orlfoIio inveslmenl
inlo India. The lolaI vaIue of inveslmenl in
INs incIusive of equily, debl and derivalive
as underIying slood al ` 1,47,905 crore as al
end March 2013 comared lo ` 1,65,832 crore
al lhe end of March 2012 (TabIe 2.60). This
oulslanding vaIue of INs as ercenlage of
AUC of IIIs had reached ils Iovesl IeveI since
2008-09. In 2012-13, lhe vaIue of INs incIusive
of derivalives slood al 11.1 ercenl of AUC
of IIIs. IxcIuding derivalives as underIying,
vaIue of INs as roorlion of AUC of IIIs
slood al 7.8 ercenlage in 2012-13.
Table 2.58: Debt Utilisation Status as on March 31, 2013
S.No. Type of Instrument Upper Limit Limit Investment Limit Free limit
Cap (in acquired (` crore) available (in ` crore)
(in USD ` crore) by the with the as on March
bn) entity entity 31, 2013
(including (in ` crore)
investment)
(in ` crore)
1 Governmenl Debl - OId 10 46,216 41,729 38,972 2,756 4,487
2 Governmenl Debl - Long Term 15 78,216 53,595 43,855 9,741 0
3(a) Cororale Debl - OId
20 99,777 96,298
82,036
11,934 3,479
3(b) Debl orienled MuluaI Iund 4,328
3 Cororale Debl - OId (QIIs) 1 5,526 438 5,088
4 Cororale Debl - Long Term 5 26,925 26,918 8,063 18,855 7
5(a) QII inveslmenl in debl 3 13,451 0 0 0 13,451
muluaI fund schemes vhich
invesl in infra
5(b) Cororale debl Iong lerm 12 53,806 0 14,425 0 39,381
infra (15 monlhs residuaI
malurily)
5 Inveslmenl in IDI 10 44,838 0 0 0 44,838
6 Uer lier - II 0.5 2,307 0 0 0 2,307
Total 76.5 3,71,062 2,18,540 1,90,117 43,285 1,37,659
Ncic. Auciicn cj |N| 29,108 crcrc in Gctcrnncni Oc|i caicgcrq (i.c. |N| 4,487 crcrc in Gctcrnncni Oc|i c|! Caicgcrq an!
|N| 24,621 crcrc in Gcti Oc|i Icng icrn caicgcrq) sna|| |c !cnc cn inc BS| jrcn 15.30 nrs ic 17.30 nrs cn Apri| 22,
2013 as pcr S|B| circu|ar nc. C||/|MO/|||C/12/2012 !aic! Apri| 27, 2012, S|B| circu|ar nc. C||/|MO/|||C/3/2013
!aic! |c|ruarq 08, 2013 an! S|B| circu|ar C||/|MO/|||C/6/2013 !aic! Apri| 01, 2013. Bcginning Apri| 01, 2013, |||s
can intcsi in Ccrpcraic Oc|i uiincui purcnasing !c|i |iniis ii|| inc ctcra|| intcsincni rcacncs 90% ajicr unicn inc auciicn
nccnanisn ucu|! |c iniiiaic! jcr a||ccaiicn cj inc rcnaining |iniis. Pursuani ic S|B| circu|ar C||/|MO/|||C/6/2013
!aic! Apri| 01, 2013, ncnccjcrin inc !aia cj !ai|q !c|i uii|isaiicn siaius ucu|! |c !isscninaic! |q inc !cpcsiicrics (NSOI
an! COSI) cn incir uc|siics, i.c. uuu.ns!|.cc.in an! uuu.c!s|in!ia.ccn rcspcciitc|q. Wni|c inc gctcrnncni anncunccs
inc |iniis cn !c|i intcsincnis ic |||s in USO icrns, jcr a||ccaiicn an! ncniicring purpcscs, incsc |iniis arc ccntcric!
inic |N| icrns using inc |B| rcjcrcncc raic as cn inai !aic.
103
Table 2.59: Notional Value of Open Interest of Foreign Institutional investors in Derivatives
during 2012-13
(` crcrc)
Items Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
1 2 3 4 5 6 7 8 9 10 11 12 13
Index 2,01,459 2,48,631 2,24,531 3,14,454 3,35,517 2,47,879 2,91,134 1,96,239 2,23,175 1,74,560 1,90,750 1,99,621
Iulures
Index 6,69,987 8,56,901 8,80,682 8,84,763 9,52,034 9,25,246 9,43,383 10,23,694 8,18,693 10,39,704 8,99,574 10,10,032
Options
Slock 4,53,531 4,73,449 4,74,343 5,60,770 5,26,430 5,34,335 5,98,962 5,94,704 6,23,980 7,34,081 5,83,925 4,77,993
Iulures
Slock 18,116 25,605 22,186 30,359 39,734 32,122 37,826 45,974 33,050 77,798 50,821 50,879
Options
Interest rate 0 0 0 0 0 0 0 0 0 0 0 0
Iulures
Total 13,43,092 16,04,586 16,01,743 17,90,345 18,53,714 17,39,582 18,71,304 18,60,611 16,98,898 20,26,144 17,25,070 17,38,526
Change in -6,76,275 2,61,494 -2,843 1,88,602 63,369 -1,14,132 1,31,722 -10,692 -1,61,713 3,27,246 -3,01,074 13,456
open
position
% Change -0.33 0.19 0.00 0.12 0.04 -0.06 0.08 -0.01 -0.09 0.19 -0.15 0.01
Table 2.60: Notional Value of Participatory Notes (PNs) Vs Assets under Management of FIIs
Total value of Total value of Assets Under Total value of Total value of
PNs on Equity PNs on Equity Custody of FIIs (B) PNs on Equity PNs on Equity &
Year/Month & Debt & Debt excluding (`crnrc) & Dcbt inc!uding Dcbt cxc!uding
including PNs PNs on PNs on derivatives PNs on derivatives
on derivatives derivatives as % of B as % of B
(`crnrc) (`crnrc)
2008-09 69,445 55,640 3,91,954 17.7 14.2
2009-10 1,45,037 1,32,557 9,00,869 16.1 14.7
2010-11 1,75,097 1,33,098 11,06,550 15.8 12.0
2011-12 1,65,832 1,15,332 11,07,399 15.0 10.4
2012-13 1,47,905 1,04,229 13,36,557 11.1 7.8
Ar-12 1,30,012 86,785 10,93,955 11.9 7.9
May-12 1,28,895 65,472 10,40,547 12.4 6.3
}un-12 1,29,851 69,523 10,90,359 11.9 6.4
}uI-12 1,29,586 68,677 10,96,492 11.8 6.3
Aug-12 1,41,710 68,450 11,13,894 12.7 6.1
Se-12 1,46,600 82,379 12,19,163 12.0 6.8
Ocl-12 1,75,829 95,536 12,21,900 14.4 7.8
Nov-12 1,77,164 94,658 12,89,612 13.7 7.3
Dec-12 1,51,084 1,01,666 13,35,189 11.3 7.6
}an-13 1,62,139 1,05,910 13,70,866 11.8 7.7
Ieb-13 1,64,271 1,05,258 13,32,496 12.3 7.9
Mar-13 1,47,905 1,04,229 13,36,557 11.1 7.8
104
7. ALTERNATIVE INVESTMENT
FUNDS
GIobaIIy, recenl videsread emergence
of crovd funding Ialforms is evidence
of innovalions in financing of slarl-u
comanies. Wilh exonenliaI grovlh of
rivale fund induslry and lheir syslemic
imorlance for slabiIily of hnanciaI markel,
gIobaIIy rivale ooIs of cailaI are being
sub|ecled lo reguIalion of dierenl degree
by various |urisdiclions. The alienl source
of aclive cailaI rovided by II or VC elc.,
Iays a very imorlanl roIe in lhe grovlh
of lhe cororale seclor and lhey bring a Iol
of governance and good quaIily money on
lhe labIe of inveslee comany. Hovever,
experience in advanced countries have
underIined lhal many aIlernalive inveslmenl
fund (AII) slralegies are vuInerabIe lo some
risks in reIalion lo inveslors, olher markel
arlicianls and markels and may aIso
serve lo sread or amIify risks lhrough lhe
financiaI syslems. The reguIalor needs lo
eslabIish a framevork caabIe of addressing
lhe reguIalory gas, concerns and risks
emanaling from various cIasses of such funds.
Wilh lhis end in viev, SII has nolihed
lhe SII (AII reguIalions) on May 21,
2012. The nev AII reguIalions rovides for
lhree calegories of AIIs vhich subsumes
lhe exisling VCIs and IVCIs. The broad
calegories are as foIIovs:
I. Category I AIF vhich vouId have
osilive siIIover eecls on economy and
vhich are sociaIIy desirabIe Iike VCIs
,SMI Iunds, SociaI Venlure Iunds and
Infraslruclure Iunds,
II. Category II AIF for vhich no secihc
reguIalory incenlives or concessions are
given and vhich shaII nol underlake
Ieverage olher lhan lo meel day-lo-day
oeralionaI requiremenls. This incIudes
Irivale Iquily Iunds and Debl Iunds,
III. Category III AIF vhich may emIoy
Ieverage or comIex lrading slralegies
and are generaIIy beIieved lo have
negal i ve exl er naI i l i es s uch as
exacerbaling syslemic risk and vhich
shaII incIude hedge funds.
Since lhe imIemenlalion of reguIalions,
42 AIIs have regi slered vi lh SII.
MeanvhiIe, lhe exisling VCIs/IVCIs vouId
conlinue lo be reguIaled as er lhe SII
(VCI) ReguIalions, 1996 and SI (IVCI)
ReguIalions, 2000. The inveslmenl delaiIs of
lhese VCIs/IVCIs are given in TabIe 2.61.
The cumuIalive nel inveslmenl of
VCIs increased by 9.4 ercenl in 2012-13 lo
` 31,556 crore from ` 28,839 crore in 2011-
12. Hovever, lhe nel inveslmenls by IVCIs
decIined by 14.5 ercenl lo ` 33,773 crore in
2012-13 from ` 39,492 crore in 2011-12. (TabIe
2.61)
Table 2.61: Cumulative Net Investments by
VCFs and FVCIs
(` crcrc) (ai inc cn! cj inc pcric!)
Year VCFs FVCIs Total (*)
2006-07 11,270 7,856 17,621
2007-08 19,955 16,705 31,682
2008-09 22,771 23,047 37,578
2009-10 18,273 28,894 39,051
2010-11 25,576 35,593 52,688
2011-12 28,839 39,492 58,936
2012-13- 31,556 33,773 55,542
Note:
|xc|u!c intcsincnis |q |VC|s inrcugn VC|s
- Iaicsi atai|a||c gurcs as cn Occcn|cr 31, 2012.
The inveslor rofiIe shovs lhal 89.3
ercenl of lhe lolaI numbers of inveslors
in exisling VCIs are individuaIs. (TabIe
2.62) Hovever, cumuIalive inveslmenls
by individuaIs comrise 21.6 ercenl of
105
lhe lolaI cumuIalive inveslmenls. On lhe
olher hand, cororale vhich accounled
for 10.6 ercenl of lhe lolaI number of
inveslors conlribuled 50.2 ercenl of lhe lolaI
cumuIalive inveslmenls. Though IVCIs onIy
comrised a miniscuIe ercenl of lhe lolaI
number, lheir corresonding inveslmenls
accounled for sizeabIe 28.2 ercenl of lhe
cumuIalive inveslmenl.
8. CORPORATE RESTRUCTURING
Iursuanl lo gIobaIisalion, lhe markel for
cororale conlroI in India has been dynamic
and vibranl. The groving number of ma|or
cross-border takeovers by Indian companies
is a leslimoniaI lo lhe aclive comelilive
Iandscae. The cororale reslrucluring
aclivilies of Iisled comanies are reguIaled
by SII. During 2011-12, SII had revamed
ils exisling Takeover ReguIalions and ul
in Iace lhe nev lakeover reguIalions
improvising the provisions so as to promote
fair, efficienl and lransarenl markel for
investors. The data pertaining to the market
for cororale conlroI is summarised in lhe
TabIe 2.63. During 2012-13, 75 oen oers
vilh oen oer size of ` 12,024 crore vas
aroved by SII. There has been subslanliaI
reversaI of lrend in lhe oen oers from
ob|eclive-vise erseclive. UnIike lhe earIier
years, 68.9 ercenl of lhe oen oer vaIue vas
from oers vilh ob|eclive of consoIidalion of
hoIdings in 2012-13. In 2011-12, 98.4 ercenl
of lhe oen oer vaIue vas vilh lhe ob|eclive
of change in conlroI of managemenl. The
number of oers vilh ob|eclive of change
in conlroI aIso had decIined subslanliaIIy
from 57 in 2011-12 lo 14 in 2012-13. On lhe
conlrary, lhe number of offers vilh lhe
ob|eclives of consoIidalion of hoIdings and
subslanliaI acquisilion of shares increased
from eighl and six resecliveIy in 2011-12 lo
34 and 27 in 2012-13.
Table 2.62: Category-wise Investors in VCFs
Category
Number of Percentage to Cumulative Percentage to total
investors total investors Investments investments
(`crnrc)
Cororale/ Inslilulions/ Olhers 4,287 10.6 24,238 50.2
IVCIs 28 0.1 13,634 28.2
IndividuaIs 36,015 89.3 10,407 21.6
NRIs 9 0.0 15 0.0
Total 40,339 100.00 48,294 100.0
106
Table 2.63: Trends in Corporate Restructuring
Ycar/Mnnth Opcn Ocrs
Objectives Total
Change in Control Consolidation of Substantial No. of Amount
of Management Holdings Acquisition issue (` crore)
No. of Amount No. of Amount No. of Amount
issue (` crore) issue (` crore) issue (` crore)
1 2 3 4 5 6 7 8 9
2008-09 80 3,713 13 598 6 400 99 4,711
2009-10 56 3,649 14 1,761 6 448 76 5,858
2010-11 71 10,251 17 8,902 14 145 103 18,748
2011-12 57 18,726 8 286 6 294 71 19,305
2012-13 14 836 34 8,284 27 2,904 75 12,024
Ar-12 2 17 1 0 0 0 3 17
May-12 1 0 0 0 3 135 4 135
}un-12 5 738 2 78 2 186 9 1,002
}uI-12 1 0 1 0 4 467 6 467
Aug-12 4 14 0 0 7 825 11 838
Se-12 0 0 3 102 3 8 6 109
Ocl-12 0 0 2 605 3 178 5 782
Nov-12 0 0 4 8 2 7 6 15
Dec-12 1 67 7 14 0 0 8 81
}an-13 0 0 8 7,209 3 1,099 11 8,308
Ieb-13 0 0 6 269 0 0 6 269
Mar-13 0 0 4 135 0 0 4 135
107
Part Three: Regulation of Securities Market
PART THREE: REGULATION OF SECURITIES MARKET
1. INTERMEDIARIES
I. Streamlining the Process of
Initial / Permanent Registration of
Intermediaries
The process for streamlining the
registration and approvals by enhancing
the transparency continued during the year
2012-13. The policy of sending response to
the applicants, in a time-bound manner i.e.,
within 30 days was adhered to. The status
of processing of each application for Initial/
Permanent registration of intermediaries
while clearly indicating why it is pending
and also whether pending with SEBI or with
the intermediary, was displayed on SEBI
website on a monthly basis. With a view
to ensure higher level of transparency and
accountability within SEBI, it is also mentioned
on the website that in case any application
remains unauended, lhe aIicanl shouId nol
hesitate to approach the concerned Division
Chief or the Executive Director of the Market
Intermediaries Regulations and Supervision
Department. The respective e-mail IDs of
concerned ociaIs is aIso disIayed.
The practice of seeking details of
corrective measures taken by the applicants
where administrative and quasi-judicial
actions have been initiated by SEBI against
them or their associate companies, at the time
of processing the applications for registration
or other approvals, has greatly improved the
compliance culture among the intermediaries.
II. Registered Intermediaries Other
than Stock Brokers and Sub-Brokers
Pursuant to the amendment to the
r espect i ve Regul at i ons i n 2011- 12,
applicants found eligible are granted initial
This part nI thc rcpnrt dc!incatcs thc Iunctinns nI 5EBI as spccicd in
Section 11 of the SEBI Act, 1992
regislralion vaIid for a eriod of hve years
from lhe dale of issue of cerlihcale lo lhe
applicant. Before the expiry of their initial
registration, if they so desire, they may apply
for permanent registration in order to
continue their business.
During 2012-13, 11 merchant bankers,
three registrars to an issue and share transfer
agents, 38 depository participants, four
bankers to an issue and two debenture
trustees were granted new/ initial registration.
Further, 62 merchant bankers, 29 registrars
to an issue and share transfer agents, 176
depository participants, one credit rating
agency, one underwriter, 24 bankers to an
issue and 12 debenture trustees were granted
permanent registration. Thus, overall 58
new entities were granted initial registration
whereas 305 existing entities were given
permanent registration (Table 3.1 and 3.1a).
To bring uniformity in the KYC
Requirements for the securities market and
set up a mechanism wherein one or more
SEBI regulated KYC Registration Agency
(KRA) shall undertake KYC for all clients in
the securities market. As on March 31, 2013,
lhere are hve KRA regislered vilh SII (TabIe
3.1).
It was decided to allow Qualified
Foreign Investors (QFI), to directly invest in
Indian equity market in order to widen the
cIass of inveslors, auracl more foreign funds,
reduce market volatility and to deepen the
Indian capital market. These investments can
be made by opening a demat account with
SEBI registered Depository Participants who
meet the prescribed eligibility criteria and
have got prior approval from SEBI. These
DIs are lermed as QuaIihed DI (QDI). As
108
on March 31, 2013, there are 31 DPs at CDSL
and 29 DPs at NSDL who have got the prior
approval to act as QDP. (Table 3.1)
III. Registration of Stock Brokers
During 2012-13, 1,081 new stock brokers
were registered with SEBI in cash segment
compared to 256 in 2011-12. Further, there
were 260 cases of cancellation/ surrender
of brokers in 2012-13 compared to 184 in
2011-12. The total number of registered stock
brokers as on March 31, 2013, increased
to 10,128 from 9,307 in 2011-12 (Table 3.2).
Applications of brokers and sub-brokers in
the process of registration are given in Table
3.2a.
Table 3.1: Registered Intermediaries other than Stock Brokers and Sub-Brokers
(Number)
Type of Intermediary
As on March 31
Absolute Percentage
2012 2013
Variation Variation
1 2 3 4 5
Registrar to Issue and Share Transfer Agent 74 72 -2 -2.7
Merchant Banker 200 199 -1 -0.5
Underwriter 3 3 0 0.0
DPs - NSDL 287 288 1 0.3
of which that acts as QDP Na 29 29 Na
DPs - CDSL 567 577 10 1.8
of which that acts as QDP Na 31 31 Na
Credit Rating Agency 6 6 0 0.0
Bankers to an Issue 56 57 1 1.8
Debenture Trustee 32 32 0 0.0
KYC (Know Your Client) Registration Agency (KRA) 0 5 5 NA
Table 3.1a: Intermediaries other than Stock Brokers and Sub-Brokers in the Process of
Registration
Registration Granted
Application received During the Year 2012-13 Pending as on
during the Year (including those March 31,
Type of Intermediary 2012-13 applications received 2013
in previous year)
Initial Permanent Initial Permanent Initial Permanent
1 2 3 4 5 6 7
Registrar to Issue and Share Transfer Agent 5 38 3 29 3 15
Merchant Banker 10 38 11 62 7 15
Underwriter 0 2 0 1 0 1
Depository Participant 31 103 38 176 11 37
Credit Rating Agency 0 0 0 1 0 0
Bankers to an Issue 5 34 4 24 5 12
Debenture Trustee 1 12 2 12 0 4
Total 52 227 58 305 26 84
109
The stock exchange MCX SX was
granted permission by SEBI to commence
trading in equities during the year 2012-13.
458 Stock Brokers were granted registration
for trading on this exchange.
The number of registered brokers was
highest in NSE (1,416) followed by BSE
(1,361), Inter-Connected Stock Exchange (ISE)
(883) and Calcutta Stock Exchange (CSE)
(869) (Table 3.3). The number of corporate
brokers were also highest in NSE (1,261)
followed by BSE (1,162) and OTCEI (496).
Corporate brokers constitute 89.1 percent
of the total stock brokers at NSE whereas
the corporate brokers constituted 85.4
percent and 76.7 percent at BSE and OTCEI,
respectively. Highest number of stock brokers
in proprietorship category was at CSE
(616), followed by ISE (537). Stock brokers in
partnership category were highest in NSE
(81), followed by CSE (43). Bhubaneswar and
Coimbatore Stock Exchanges did not have
any brokers in the partnership category
(TabIe 3.3).
In equity derivative segment, 34 trading
members (TM), three clearing members
(CM) and eight self-clearing members
(SCM) were granted registration at NSE
Futures and Options (F&O) segment during
2012-13. In case of BSE F&O segment, the
corresonding hgures vere 63, seven and
three respectively. 313 trading members
and 72 clearing members were granted
registration at MCX-SX in Futures and
Options (F&O) segment during the same
period. Further, four trading members
were granted registration at Madras Stock
Exchange (MSE), 59 trading members were
granted registration at Madhya Pradesh Stock
Exchange (MPSE) and 17 trading members
vere granled regislralion al CaIcuua Slock
Exchange (CSE) during 2012-13 (Tables 3.4).
In the currency derivatives segment,
total number of registered members with
NSE, BSE, MCX-SX and USE in various
categories were 1,074, 189, 1,040 and 473
respectively at the end of March 31, 2013
(Table 3.5).
Table 3.2: Registered Stock Brokers
(Number)
Details 2011-12 2012-13
1 2 3
Registered Stock Brokers in the beginning of the year 9,235 9,307
Addition during the Year 256 1,081
Reconciliation / Cancellation/ Surrender of Memberships 184 260
Registered Stock Brokers as on March 31 9,307 10,128
Table 3.2a: Stock Broker and Sub-Broker Applications under the Process of Registration*
(Number)
Category of Application Number of Applications under Process
1 2
Registration Brokers in Cash Segment 96
Registration Brokers in Equity Derivatives Segment 148
Registration Brokers in Currency Derivatives Segment 81
Sub-broker 42
Nole: () These aIicalions are ending al dierenl slages viz. slock exchanges / slock brokers for vanl of documenls
/ cIarihcalions or under rocess in SII. The dala is as on March 31, 2013.
110
Tab!c 3.3: C!assicatinn nI 5tnck Brnkcrs in Cash 5cgmcnt nn thc Basis nI Owncrship
Proprietorship Partnership Corporate** Total
Stock Exchange 2012 2013 2012 2013 2012 2013 2012 2013
Nos. Percent Nos. Percent Nos. Percent Nos. Percent Nos. Percent Nos. Percent Nos. Nos.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Ahmedabad 137 40.3 137 40.4 21 6.2 22 6.5 182 53.5 180 53.1 340 339
Bangalore 134 49.1 127 48.7 6 2.2 6 2.3 133 48.7 128 49.0 273 261
BSE 181 13.2 171 12.6 30 2.2 28 2.1 1,164 84.6 1,162 85.4 1,376 1,361
Bhubaneswar 195 91.1 185 91.6 0 0.0 0 19 8.9 17 8.4 214 202
CaIcuua 644 72.2 616 70.9 43 4.8 43 5.0 204 22.9 210 24.2 892 869
Cochin 350 79.4 320 78.6 9 2.0 9 2.2 82 18.6 78 19.2 441 407
Coimbatore 88 64.7 87 64.4 0 0.0 0 0.0 48 35.3 48 35.6 136 135
Delhi 190 38.2 183 37.8 32 6.4 30 6.2 275 55.3 271 56.0 497 484
Gauhati 90 95.7 59 95.2 1 1.1 1 1.6 3 3.2 2 3.2 94 62
ISE 552 60.2 537 60.8 28 3.1 27 3.1 336 36.6 319 36.1 917 883
Jaipur 447 94.9 434 94.8 6 1.3 6 1.3 18 3.8 18 3.9 471 458
Ludhiana 215 70.3 213 70.1 2 0.7 2 0.7 89 29.1 89 29.3 306 304
MPSE 162 77.9 187 73.1 1 0.5 1 0.4 45 21.6 68 26.6 208 256
Madras 112 51.9 104 52.5 14 6.5 13 6.6 90 41.7 81 40.9 216 198
NSE 72 5.1 74 5.2 80 5.6 81 5.7 1,269 89.2 1,261 89.1 1,423 1,416
OTCEI 145 21.0 135 20.9 18 2.6 16 2.5 528 76.4 496 76.7 691 647
Pune 123 67.6 117 67.6 7 3.9 7 4.1 52 28.6 49 28.3 182 173
UPSE 244 77.0 210 75.0 3 1.0 3 1.1 70 22.1 67 23.9 317 280
Vadodara 245 78.3 242 78.1 3 1.0 3 1.0 65 20.8 65 21.0 313 310
MCX-SX 0 0.0 20 4.4 0 0.0 10 2.2 0 0.0 428 93.5 0 458
* As on March 31 of the respective year.
The calegories of hnanciaI inslilulions and comosile cororale are cIubbed vilhin lhe calegory of cororale broker.
Note: Percent ownership represents category-wise percent share for a particular exchange.
111
Table 3.4: Number of Registered Members in Equity Derivatives Segment
(Number)
NSE BSE MSE MPSE CSE MCX-SX
Regis- Regis- Regis- Regis- Regis- Regis- Regis- Regis- Regis- Regis- Regis- Regis-
Type trations trations trations trations trations trations trations trations trations trations trations trations
of granted at the granted at the granted at the granted at the granted at the granted at the
Member during end of during end of during end of during end of during end of during end of
2012-13 March 2012-13 March 2012-13 March 2012-13 March 2012-13 March 2012-13 March
2013 2013 2013 2013 2013 2013
1 2 3 4 5 6 7 8 9 10 11 12 13
Trading
Member 34 1,374 63 993 4 30 59 89 17 17 313 313
Clearing
Member 3 270 7 148 0 0 0 0 0 0 72 72
Self
Clearing
Member 8 454 3 41 0 0 0 0 0 0 0 0
Total 45 2,098 73 1,182 4 30 59 89 17 17 385 385
Table 3.5: Number of Registered Members in Currency Derivatives Segment
(Number)
NSE BSE MCX-SX USE
Type of Registration Registrations Registrations Registrations Registrations Registrations Registrations Registrations
Member during at the end of during at the end of during at the end of during at the end of
2012-13 March 2013 2012-13 March 2013 2012-13 March 2013 2012-13 March 2013
1 2 3 4 5 6 7 8 9
Trading Member 45 878 0 158 91 864 12 414
Clearing Member 5 186 0 31 8 163 0 56
Self-clearing Member 2 10 0 0 12 13 0 3
Total 52 1,074 0 189 111 1,040 12 473
112
IV. Registration of Sub-brokers
The number of registered sub-brokers
has declined by 9.1 percent from 77,165
as on March 31, 2012 to 70,178 as on
March 31, 2013. However, the number of
Authorised Persons (APs) as approved by
the stock exchanges in accordance with SEBI
Guidelines, has increased substantially (27.1
percent) during the year (from 98,533 as on
March 31, 2012 to 1,25,273 as on March 31,
2013). Stock brokers were allowed to provide
market access to clients through APs, in
addition to sub-brokers, with a view to
expand the reach of the markets for exchange
traded products, vide SEBI circular dated
November 6, 2009. Thus, while number of
sub-brokers has come down, the increased
presence of APs has ensured the increase
in reach of the markets for exchange traded
products, as intended while introducing the
concept of APs (Table 3.6).
V. Recognition of Stock Exchanges
The stock exchanges are granted
recognition by SEBI under Section 4 of the
Securities Contracts (Regulation) Act, 1956.
Presently, there are 21 stock exchanges
recognised under SC(R)A. Out of which,
eight stock exchanges have permanent
recognition. (Table 3.7) During the year,
renewal of recognition was granted to 12
stock exchanges. Application of Coimbatore
Stock Exchange Ltd. for exit is under
examination. Beside, the Hyderabad Securities
Table 3.6: Registered Sub-brokers*
2012 2013
Stock Exchange
Number Percentage of Total Number Percentage of Total
1 2 3 4 5
Ahmedabad 81 0.1 77 0.1
Bangalore 158 0.2 158 0.2
Bhubaneswar 16 0.0 14 0.0
BSE 33,852 43.9 31,635 45.1
CaIcuua 71 0.1 71 0.1
Cochin 41 0.1 41 0.1
Coimbatore 20 0.0 20 0.0
Delhi 222 0.3 200 0.3
Gauhati 4 0.0 4 0.0
Interconnected 1 0.0 0 0.0
Jaipur 30 0.0 30 0.0
Ludhiana 28 0.0 21 0.0
Madhya Pradesh 5 0.0 5 0.0
Madras 107 0.1 103 0.1
NSE 42,327 54.9 37,600 53.6
OTCEI 14 0.0 14 0.0
Pune 156 0.2 156 0.2
Uuar Iradesh 3 0.0 2 0.0
Vadodara 29 0.0 27 0.0
Total 77,165 100 70,178 100
* As on March 31 of the respective year.
113
and Enterprises Ltd (erstwhile Hyderabad
Stock Exchange) has been granted exit by
SEBI vide order dated January 25, 2013. (Table
3.8)
VI. Memorandum of Understanding
(MnU) bctwccn 5tnck Exchangcs:
Pursuant to Section 13 of Securities
Contracts (Regulation) Act, 1956, stock
exchanges can enter into an MoU for trading.
In this regard, Madhya Pradesh Stock
Exchange operationalised trading under such
MoU with NSE and BSE. Further, Madras
Tab!c 3.7: 5tnck Exchangcs with Pcrmancnt Rccngnitinn
Sr. No. Exchanges Recognition
1 2 3
1 Ahmedabad Stock Exchange Permanent
2 Bangalore Stock Exchange Permanent
3 Bombay Stock Exchange Permanent
4 CaIcuua Slock Ixchange Iermanenl
5 Delhi Stock Exchange Permanent
6 Madhya Pradesh Stock Exchange Permanent
7 Madras Stock Exchange Permanent
8 National Stock Exchange of India Permanent
Tab!c 3.8: Rcncwa! nI Rccngnitinn Grantcd tn 5tnck Exchangcs during 2012-13
Sr.
Exchanges
Date of
Period
Nn. Nnticatinn
1 2 3 4
1. Ludhiana Stock Exchange Apr 27, 2012 Apr 28, 2012 Apr 27, 2013
2. Gauhati Stock Exchange Apr 30, 2012 May 1, 2012 Apr 30, 2013
3. Uuar Iradesh Slock Ixchange May 25, 2012 }un 03, 2012 }un 02, 2013
4. Bhubaneswar Stock Exchange Jun 05, 2012 Jun 05, 2012 Jun 04, 2013
5. OTC Exchange of India Aug 22, 2012 Aug 23, 2012 Aug 22, 2013
6. Pune Stock Exchange Aug 29, 2012 Sept 02, 2012 Sept 01, 2013
7. MCX Stock Exchange Ltd. Sept 11, 2012 Sept 16, 2012 Sept 15, 2013
8. Cochin Stock Exchange Nov 6, 2012 Nov 08, 2012 Nov 07, 2013
9. Interconnected Stock Exchange of India Nov 09, 2012 Nov 18, 2012 Nov 17, 2013
10. Vadodara Stock Exchange Dec 26, 2012 Jan 04, 2013 Jan 03, 2014
11. Jaipur Stock Exchange Jan 8, 2013 Jan 09, 2013 Jan 08, 2014
12. United Stock Exchange of India Mar 20, 2013 Mar 22, 2013 Mar 21, 2014
Slock Ixchange and CaIcuua Slock Ixchange
operationalised trading with NSE.
VII. Registration of Foreign
Institutional Investors
Sub-accounts and Custodians
During 2012-13, there was a decrease in
the number of Foreign Institutional Investors
(FIIs) registered with SEBI. As on March
31, 2013, there were 1,757 FIIs registered
with SEBI as compared to 1,765 a year ago,
showing a decrease of eight (in number)
during the year. However, the number
114
of registered sub-accounts has increased
marginally to 6,335 as on March 31, 2013
compared to 6,322 as on March 31, 2012
(Table 3.9).
VIII. Registration of Collective
Investment Schemes (CIS)
As on March 31, 2013, there was only
one regislered CIS, viz. M/s. Gifl CoIIeclive
Investment Management Company Ltd.
which was registered during 2008-09.
IX. Registration of Mutual Funds
As on March 31, 2013, 52 mutual funds
were registered with SEBI, of which 45 were
in the private sector and seven (including
UTI) were in public sector. During 2012-13,
four nev MuluaI Iunds viz. IIIAS MuluaI
Fund, SREI Mutual Fund, IIFCL Mutual
Fund and IL&FS Mutual Fund were granted
registration of which SREI Mutual Fund,
IIFCL Mutual Fund and IL&FS Mutual Fund
are dedicated Mutual Funds for Infrastructure
Debt Fund (IDF).
During 2012-13, Fidelity Mutual Fund
was acquired by L&T Mutual Fund following
which registration of Fidelity Mutual Fund
was cancelled. AIG Mutual Fund sold its
entire stake to PineBridge Investments
Table 3.9: Number of Registered FIIs,
Sub-accounts and Custodians
(Number)
As on As on
Particulars March March
31, 2012 31, 2013
1 2 3
Number of FIIs 1,765 1,757
Number of Sub-accounts 6,322 6,335
Number of Custodians 19 19
During lhe hnanciaI year, a lolaI of 78
fresh FIIs were registered. Further, 581 fresh
sub-account were registered with SEBI during
2012-13. IIIs from 56 dierenl |urisdiclions
have been registered by SEBI out of which
USA has the maximum number of 578,
followed by UK (207), Luxembourg (125),
Mauritius (101), Canada (79) and Singapore
(75) respectively. Status of registration of FIIs,
sub-accounts and custodians during 2012-13
is provided in Table 3.9a.
Table 3.9a: Status of Registration of FII, Sub-accounts and Custodians during 2012-13
FII Sub Account Custodian
Particulars Fresh Fresh Fresh
Regi- Rcncwa! Total Regi- Rcncwa! Total Regi- Rcncwa! Total
stration stration stration
1 2 3 4 5 6 7 8 9 10
I. Application received for fresh
registration / renewal 106 422 528 571 1458 2029 0 17 17
a. Applications
registered / renewed 78 384 462 581 1416 1997 0 16 16
b. Applications pending# 26 79 105 107 277 384 2 1 3
c. Application rejected /
returned* 3 0 3 5 0 5 NA NA NA
Some of lhe aIicalions lhal vere relurned due lo various reasons may have been resubmiued and vouId have
got subsequently registered or rejected.
- Reresenls lolaI cumuIalive number of ending aIicalions as on March 31, 2013. The hgure aIso conlains lhose
applications which were received before FY 2012-13.
115
Japan Co. Ltd following which registration
of AIG Mutual Fund was cancelled and it
was renamed to PineBridge Mutual Fund.
Bank of India acquired 51% stake in Bharti
AXA Mutual Fund, pursuant to which its
name was changed to BOI AXA Mutual
Fund. Invesco Hong Kong Limited acquired
49 percent stake in Religare Mutual Fund
(Table 3.10).
SEBI notified Alternative Investment
Funds (AIFs) Regulations, 2012 (AIF
Regulations, 2012) on May 21, 2012. AIF are
basically funds established or incorporated
in India for the purpose of pooling in
capital from Indian and foreign investors for
investing. During 2012-13, 42 AIF have been
registered with SEBI.
Out of 42 registered Alternative
Investment Funds (AIFs), Category I, II and
III AIFs are 13, 22 and 7 respectively. Further,
out of the 13 AIFs registered in Category I,
lhere are hve, lhree, lhree and lvo AIIs in
VCF, Infrastructure, SME and Social AIFs
respectively.
XI. Fees and Other Charges
Details of the amount of fees and other
charges (un-audited) collected by SEBI from
market intermediaries on both recurring
and non-recurring basis is provided in Table
3.12. During 2012-13, the total amount of
fees and other charges received was ` 149
crore (unaudited) as against ` 154.5 crore
in 2011-12 (audited). The recurring fee was
59.4 percent in 2012-13 as compared to 55.9
percent in 2011-12. The largest amount
of ` 34.8 crore which was fully recurring
in nature was collected from derivatives
members registration, while the second
largest recurring fee of ` 20 crore was
collected from stock brokers and sub-brokers.
In non recurring fee category, the highest
fee was collected from FIIs (` 11.6 crore)
followed by fees from mutual funds (` 11.2
crore), takeover fees (` 10.3 crore), and sub-
accounts (` 10.2 crore).
Tab!c 3.10: Mutua! Funds Rcgistcrcd with
SEBI
(Number)
As on As on
Sector March March
31, 2012 31, 2013
1 2 3
Public Sector (including UTI) 5 7
Private Sector 44 45
Total 49 52
Table 3.11: Registered Venture Capital
Funds / AIFs
(Number)
As on As on
VCFs March March
31, 2012 31, 2013
1 2 3
VCF 207 211
FVCI 175 182
AIFs Na 42
X. Registration of Venture Capital
Funds
There were 211 domestic and 182 foreign
venture capital funds registered with SEBI as
on March 31, 2013 compared to 207 and 175
funds respectively registered with SEBI as on
March 31, 2012 (Table 3.11).
116
Table 3.12: Fees and other Charges
(` crore)
2011-12 2012-13 (Unaudited)
Recu- Non-re- Total Recu- Non-re- Total
Particulars rring curring Fees rring curring Fees
fees fees Received fees fees Received
# ## # ## (Un-
audited)
1 2 3 4 5 6 7
Oer Documenls and rosecluses hIed 0.0 13.8 13.8 0.0 4.9 4.9
Merchant Bankers 1.5 2.6 4.1 3.0 2.0 5.0
Underwriters 0.0 0.0 0.0 0.1 0.0 0.1
Portfolio Managers 3.4 3.6 7.0 2.8 2.5 5.2
Registrars to an Issue and Share Transfer Agents 0.1 0.0 0.1 0.4 0.1 0.5
Bankers to an Issue 0.1 0.2 0.3 1.1 0.8 1.9
Debenture Trustees 0.1 0.2 0.3 0.5 0.4 0.9
Takeover fees 0.0 6.5 6.5 0.0 10.3 10.3
Mutual Funds 2.3 11.9 14.2 2.4 11.2 13.6
Stock Brokers and Sub-Brokers 14.4 0.0 14.4 20.0 0.0 20.0
Foreign Institutional Investors 0.0 14.1 14.1 0.0 11.6 11.6
Sub Account Foreign Institutional Investors 0.0 11.2 11.2 0.0 10.2 10.2
Depositories 0.2 0.0 0.2 0.0 0.2 0.2
Depository Participants 0.1 0.9 1.0 0.1 2.2 2.3
Venture Capital Funds 0.0 1.7 1.7 0.0 0.2 0.2
Custodian of Securities 9.2 0.0 9.2 10.0 0.2 10.2
Approved Intermediaries under Securities Lending Scheme 0.1 0.0 0.1 0.0 0.0 0.0
Credit Rating Agencies 0.3 0.1 0.4 0.1 0.0 0.1
Listing Fees Contribution from Stock Exchanges 7.1 0.0 7.1 6.9 0.0 6.9
Alternative Investment Scheme 0.0 0.0 0.0 0.0 2.8 2.8
KYC Registration Agency 0.0 0.1 0.1 0.0 0.1 0.1
Foreign Venture Capital 0.0 1.2 1.2 0.0 0.8 0.8
Derivatives Members registration 39.5 0.0 39.5 34.8 0.0 34.8
Informal Guidance Scheme 0.0 0.1 0.1 0.0 0.0 0.0
Regulatory Fees 8.2 0.0 8.2 6.4 0.0 6.4
Total 86.5 68.1 154.5 88.5 60.5 149.0
Notes:
# Recurring fees: Fees which is received on annual / 3-yearly / 5-yearly basis (includes Fee / Service Fee / annual fee
/ Listing Fees from exchanges / Regulatory Fees from stock exchanges).
-- Non-recurring fees: Iees vhich is received on one lime basis. IncIudes fee for Oer Documenls IiIed / Regislralion
Fee / Application Fee / Takeover Fees / Informal Guidance Scheme / FII Registration and FII Sub Accounts
Registration.
Note:
1. Since the amount realised by way of penalties on or after 29.10.2002 has been credited to the Consolidated Fund
of India, therefore, the same has not been included in the fees income of SEBI since 2003-04.
2. Stock brokers and sub-brokers fee includes annual fees and turnover fees.
3. Stock brokers and derivatives fees are of recurring nature and depend on the trading turnover of the stock brokers
and members of derivatives segment.
117
2. CORPORATE RESTRUCTURING
I. Substantial Acquisition of Shares
and Takeovers
As on March 31, 2012, total 32 draft
Ieuers of oer for issue of observalions vere
ending vilh SII. During lhe hnanciaI year
2012-13, addilionaI 76 drafl Ieuers of oer
vere hIed vilh SII (of vhich lvo vere
hIed under oId Takeover ReguIalions vhiIe
74 olhers vere hIed under nev Takeover
Regulations) and observations were issued on
87 drafl Ieuers of oer during lhe year and 21
drafl Ieuers of oers vere ending vilh SII
for issuance of observations as on March 31,
2013 (Table 3.13).
Regulation 4 of Takeover Regulations
deals with applications for seeking exemption
from open offer obligations provided in
Chapter III of Takeover Regulations (referred
as Takeover Panel Applications). A total of 22
applications were examined during 2012-13,
of which, in 10 applications, exemption was
granled from oen oer obIigalions, lhree
applications were returned/ withdrawn/
rejected (Table 3.13). There were nine
Takeover Panel applications pending as on
March 31, 2013.
During lhe hnanciaI year 2012-13, 80
offers were launched for fulfilling open
oer obIigalions. In 10 cases, SII granled
exemlion from oen oer obIigalions. (TabIe
3.14)
Tab!c 3.13: 5tatus nI DraIt Lcucr nI Ocrs
for Open Offers filed under
Regul at i on 18( 1) of SEBI
(SAST) Regulations, 1997 {Old
Takeover Regulations} and under
Regulation 16(4) of SEBI (SAST)
Rcgu!atinns, 2011 Ncw Takcnvcr
Regulations} during 2012-13
Status
Number
of cases
1 2
DraIt !cucrs nI ncr Inr npcn ncr
Drafl Ieuers of oer as on March 31, 2012 32
Drafl Ieuers of oer received during 2012-13,
under Old Takeover Regulations 2
Drafl Ieuers of oer received during 2012-13,
under New Takeover Regulations 74
Total 108
Observations issued by SEBI during 2012-13 87
Drafl Ieuers of oer in rocess as on
March 31, 2013 21
Takeover Panel Applications
Applications as on March 31, 2012 10
Applications received during 2012-13,
under New Takeover Regulations 12
Total Applications 22
Applications disposed of during 2012-13 13
Applications in process as on March 31, 2013 9
Tab!c 3.14: Opcn ncrs and Excmptinn Irnm
Opcn Ocrs
(Number)
Exemption
Pcrind Opcn ncrs Irnm npcn
ncrs
1 2 3
2009-10 76 18
2010-11 101 16
2011-12 71 9
2012-13 80 10
II. Buyback
The total of 20 buyback offers were
received during 2012-13 indicating a decrease
of 31 ercenl over 29 buyback oers received
during 2011-12. Out of the 17 cases filed
during the year for buyback through open
market purchase method, three cases were
opened and closed and 14 cases were opened
but did not close. Further, there were three
cases of buyback lhrough lender oer vhich
opened and also closed during 2012-13 (Table
3.15).
118
A lolaI of six buyback oers oened
and closed during 2012-13 as compared to
12 oers during 2011-12. The lolaI buyback
oer size during 2012-13 vas ` 1,277 crore as
comared lo buyback oer size of ` 13,058
crore in 2011-12 indicting a decrease of 90.2
percent over the previous year. It was also
observed from lhe buyback oers vhich vere
opened and closed during 2012-13 that there
vas an average uliIizalion of 35.7 ercenl of
lolaI oer size. During 2012-13, lhree lender
oer vere fuIIy subscribed and funds vere
completely utilised.
3. SUPERVISION
Supervision of intermediaries through
on-sile and o-sile inseclions, enquiries and
adjudications in case of violation of rules and
regulations and administrative and statutory
actions are essential features of effective
enforcement by SEBI.
SEBI conducts inspections directly as
well as through organisations like stock
exchanges, depositories, etc. Inspections on
a periodic basis were conducted to verify
the compliance levels of intermediaries.
Special purpose i.e. theme based inspections
were also conducted on the basis of investor
complaints, references, surveillance reports,
specific concerns, etc. Special purpose
inspections of major stock exchanges as well
as the depositories were also carried out in
order lo examine lhe eecliveness and quaIily
of their audit/inspections and the action
taking process.
I. Promotion and Regulation of Self
Regulatory Organisations
SEBI (Self Regulatory Organisations)
ReguIalions, 2004 vere nolihed on Iebruary
19, 2004 with the objective to promote
organisation of intermediaries representing
a particular segment of the securities market
as a self regulated entity / organisation. For
recognition of organisation of intermediaries
as SROs, SEBI held discussions with various
bodies like Association of Merchant Bankers
of India (AMBI), Association of NSE Members
of India (ANMI) and Registrars Association of
India (RAIN). The various measures taken in
2012-13 for promotion and regulation of Self
Regulatory Organisations are:
A. To enabIe seuing u of an SRO for
distributors, SEBI (Self Regulatory
Or ga ni s a t i ons ) ( Ame ndme nt s )
Regulations, 2013 w.e.f. January 7,
2013 amendmenls added lhe dehnilion
of distributor and issuer, revised the
dehnilion of inlermediary and slaled
that a distributor shall be deemed to be
an intermediary.
B. Under Regulation 14 of SEBI (Investment
Advisers) Regulations, 2013, SEBI may
recognise any body or body corporate
Table 3.15: Buyback cases during 2012-13
Buy-back Cases No. of Cases
Buy-back Size Actual amount utilized for
(` crore) buy-back of securities (`crore)
1 2 3 4
Buy-back through Open Market
Cases Received, Opened and Closed 3 332 264.1
Cases Received, Opened but not Closed 14 753.2 Na
Buy-back thrnugh Tcndcr Ocr
Cases Received, Opened and Closed 3 191.6 191.6
119
for the purpose of regulating investment
advisers and delegate administration
and supervision of investment advisers
to such body or body corporate. As
decided in the Board Meeting in which
the Regulations were approved, SEBI
will directly register and regulate the
Investment Advisors till such time an
SRO is recognised for the purpose.
II. Inspection of Market
Intermediaries
The number of i nspect i ons has
substantially increased from 111 in the
hnanciaI year 2011-12 lo 300 in lhe hnanciaI
year 2012-13. The inspection process of
intermediaries has been further streamlined
with a view to improve the quality such
as selection of themes for inspections,
questionnaire for inspections and follow up
action.
ased on hndings of inseclions afler
considering the comments of intermediaries,
lhey vere secihcaIIy advised aboul lhe areas
where improvement was required by them.
They were also required to report to SEBI
about the corrective steps taken by them
and also place the same before their board/
partners/proprietor, as the case may be. These
steps taken by SEBI have improved the level
of compliance among the intermediaries.
Administrative and quasi-judicial actions
vere inilialed based on lhe dehciencies and
seriousness of lhe vioIalions commiued by lhe
intermediaries.
A. Inspection of Stock Brokers
During the year 2012-13, 162 stock
brokers have been inspected as against 69
during lhe year 2011-12. Secihc urose
risk-based inspections were carried out
during the year. The focus of the inspections
included themes such as compliance of
norms regarding Anti-money Laundering,
seuIemenl of accounls of cIienls on limeIy
basis, Segregation of clients and proprietary
funds/securities, KYC norms, clearing
operations, etc. During inspections, the
compliance of specific provisions of SEBI
reguIalions/ circuIars vas verihed. The delaiIs
of inspection of stock brokers and sub-brokers
carried out are given in Table 3.16.
Table 3.16: Inspection of Stock Brokers/Sub-
brokers
Particulars 2011-12 2012-13
1 2 3
Inspections Completed 69 162
Stock Brokers
Inspections Completed 12 39
Sub - brokers
Total 81 201
Table 3.16a: Inspection by Stock Exchange/ Clearing Corporation
(Number)
Year NSE BSE MCX-SX USE
1 2 3 4 5
2011-12 1,044 746 133 99
2012-13 1,384 936 245 89
In compliance with the requirement of
inspecting all active members by the stock
exchanges, the number of entities inspected
by the stock exchanges is given in Table 3.16a:
Additionally, stock brokers/clearing
members are required to carry out complete
internal audit on a half yearly basis by
independent auditors. By and large, all the
120
active stock brokers/clearing members of the
four major stock exchanges (NSE, BSE, USE
and MCX-SX) have submiued lhe inlernaI
audit reports for the half year ended March
31, 2012 and September 30, 2012, to the
respective stock exchanges.
The system of internal audits of stock
brokers by outside professionals, inspections
by stock exchanges and by SEBI has improved
the compliance level of stock brokers.
B. Inspection of Other Intermediaries
Special focus inspections of inter-
mediaries are undertaken by SEBI to ascertain
lhe exlenl of comIiance on secihc issues.
SEBI carried out inspection of merchant
bankers to check the due diligence exercised
in respect of pre-issue and post-issue activities.
Apart from such due diligence inspections,
inspections of merchant bankers were also
carried out to ascertain compliance with SEBI
Circular on disclosure of track record of public
issues managed by merchant bankers.
Inspection of registrars to an issue was
carried out to check the allotment process
followed and the redressal of investor
complaints. Besides, inspections of share
transfer agents including in-house share
transfer agents were conducted to ascertain
the process followed by them in executing
investor requests such as transmission, etc.
and the Disaster Recovery and Business
Continuity Plan (DR&BCP) adopted by them.
SEBI conducted inspections of debenture
trustees based on the number of public issues
handIed by lhem lo conhrm lhe comIiance
with the applicable regulatory and statutory
requirements with focus on their systems
and controls with respect to monitoring of
payment of interest/ redemption amount,
processing of investor grievances and action
taken in case of defaults by issuer companies.
Inspection of Portfolio Managers were
conducted so to ascertain various compliance
requirements including the Know Your
Client (KYC) due diligence carried out by
the Portfolio Manager. A total of seven
inspections were carried out. Further, 58
pre-registration/renewal visits of portfolio
managers were conducted. This was primarily
done to check the general compliance level in
the portfolio managers.
During 2012-13, inspections were
completed for 51 depository participants, 16
merchanl bankers, hve credil raling agencies,
10 debenture trustees and 17 RTI & STA. The
total number of inspections conducted by
SEBI of these intermediaries has increased
substantially during the year, from 30 in 2011-
12 to 99 in 2012-13 (Table 3.17). There was
special focus on follow-up action after the
inspections so that corrective steps are taken
by the intermediaries.
Table 3.17: Inspection of other Market
Intermediaries
(Number)
Particulars 2011-12 2012-2013
1 2 3
Debenture Trustee 3 10
Registrar to Issue and
Share Transfer Agent
(RTI&STA) 2 17
Merchant Banker 7 16
Depository Participant 13 51
Credit Rating Agency 5 5
Total 30 99
III. Inspection of Depositories
During the inspection of depositories,
a revi ew of t he market operat i ons,
organizalionaI slruclure and adminislralive
121
control of the depository is conducted to
ascertain as to whether:-
a. The procedures and practices of the
depository are in compliance with the
Depositories Act 1996, SEBI (Depositories
and Participants), Regulations, 1996,
SEBI circulars, the bye-laws etc.
b. The book of account are bei ng
maintained by the depository, in the
manner secihed in SII (Deosilories
and Participants), Regulations, 1996
c. The complaint received by depositories
from participants, issuers, issuers agent,
benehciary ovners or any olher erson
are redressed;
Duri ng 2012- 13, comprehensi ve
inspection of Central Depository Services
(India) Limited (CDSL) was conducted
to ascertain the systems, procedures and
practices in conducting the inspection of
depository participants by depositories and
desirability of adopting the practices by
depositories.
IV. Inspection of Stock Exchanges
Duri ng t he i nspect i on of st ock
exchanges, a review of market operations,
organizalionaI slruclure and adminislralive
control of the stock exchange is conducted to
ascertain as to whether :-
Il rovides a fair, equilabIe, lransarenl
and growing market to the investors ,
Ils organizalion syslem and raclices are
in accordance with the SC(R) Act , 1956
and rules framed there under,
Il has imIemenled lhe direclions,
guidelines and instructions issued by
SEBI/ Government of India (GoI) from
time to time and
Il has comIied vilh lhe condilions, if
any, imposed on it at the time of renewal
/ grant of its recognition under section 4
of the SC(R) Act, 1956.
During the year 2012-13, comprehensive
inspections were carried out at the following
stock exchanges
a. MCX Stock Exchange (MCX-SX)
b. United Stock Exchange (USE)
c. Uuar Iradesh Slock Ixchange (UISI)
d. Bombay Stock Exchange (BSE)
In addilion lo lhis, during lhe hnanciaI
year 2012-13, compliance inspections were
carried at the following stock exchanges:-
a. Pune Stock Exchange (PSE)
b. Inter-connected Stock Exchange of India
(ISE)
c. Cochin Stock Exchange
d. Ludhiana Stock Exchange (LSE)
e. Gauhati Stock Exchange (GSE)
f. Jaipur Stock Exchange (JSE)
g. OTC Exchange of India (OTCEI)
The Compl i ance i nspect i ons of
exchanges were carried out for the purpose
of renewal of recognition of stock exchange.
V. Prevention of Money Laundering
Money Iaundering is gIobaIIy recognized
as one of the largest threats posed to the
financial system of a country. The fight
againsl lerrorisl hnancing is anolher such
emerging threat with grave consequences
for both the political and economic standing
of a jurisdiction. Rapid developments and
grealer inlegralion of lhe hnanciaI markels
together with improvements in technology
and communication channels continue to
pose serious challenges to the authorities
and institutions dealing with anti-money
laundering and combating financing of
terrorism (AML and CFT).
122
The Prevention of Money Laundering
Act, 2002 (PMLA) and the rules framed there-
under, which have been brought into force
vilh eecl from }uIy 1, 2005, have been a
signihcanl sle laken by India lovards |oining
the global war against money laundering and
hnancing of lerrorism. This Acl has recenlIy
been amended in December 2012 so that the
legislative and administrative framework
of lhe counlry becomes more eeclive and
capable of handling new evolving threats in
lhe area of money Iaundering and hnancing
of terror.
As in the past, during 2012-13, SEBI has
conlinued ils focused eorls lo slrenglhen
lhe reguIalory framevork and minimize lhe
risk emanating from money laundering and
lerrorisl hnancing in lhe securilies markel.
The following steps have been taken in this
regard:
A. Idcnticatinn nI Bcnccia! Owncrship
To further tackle the risk posed by the
misuse of complex legal structures, such
as, companies, partnerships, trusts, etc. in
money Iaundering or hnancing of lerrorism,
SEBI, vide circular dated January 24, 2013
has made it mandatory for its intermediaries
lo idenlify lhe benehciaI ovner (O) and lo
take all reasonable steps to verify the identity
of such BOs for clients who are legal persons/
arrangements. These guidelines are in line
with the revised Financial Action Task Force
(FATF) standards. (Box 3.1 may be referred
for details)
B. Inspections on AML/CFT related issues
SEBI has appropriately included the
AML/CFT risks as part of its inspection
of intermediaries, such as, stock brokers,
depository participants and mutual funds.
SEBI has also carried out specific theme
based inspections of intermediaries focusing
on compliance with KYC norms (which
includes Client Due Diligence) and AML/
CIT guideIines. In conlinualion lo lhe secihc
purpose inspections of stock brokers to check
their compliance with KYC norms, which
were conducted last year, in 2012-13 SEBI has
carried out 40 special purpose inspections of
stock brokers to check their compliance with
the AML/CFT framework that has been put in
place. Further 35 inspections of stock brokers
and six depository participants focusing on
compliance with KYC norms have also been
carried out in 2012-13. In addition to the
special purpose inspections conducted by
SEBI, compliance with AML/CFT norms is also
verihed by lhe slock exchange and deosilories
during their inspections of stock brokers and
depository participants and also at the time
of half yearly internal audits by independent
professionals. Depository participants are
also required to undergo concurrent audits
with respect to their operations, which
includes account opening/KYC/AML norms.
Appropriate sanctions are applied where
AML/CFT violations/discrepancies are
observed. Further, the penalty structure of the
stock exchanges has been recently reviewed
and the penalties imposed for KYC and
AML/CFT discrepancies/violations have been
suitably enhanced.
The table given below provides data on
the number of members/participants against
whom action for AML/CFT discrepancies has
been taken by the exchanges and depositories
in 2012-13:
123
Table 3.18: Actions against AML / CFT Violations / Discrepancies
Particular NSE BSE CDSL NSDL
1 2 3 4 5
No. of members where AML discrepancies
were observed and action taken 62 310 * 57 34
of which
Advice issued 58 308 * 57 30
Fines levied 4 16 * 1 5
VaIue of hnes imosed (in `) 35,000 3,68,000 * 2,500 3,700
Number of members reorled is based on number of member inseclion hIes rocessed & comIeled liII March
31, 2013 irrespective of the period in which inspection was conducted
Bnx 3.1 : Guidc!incs nn Idcnticatinn nI Bcnccia! Owncrship (contd.)
enehciaI ovner is dehned as lhe naluraI erson or ersons, vho uIlimaleIy ovn, conlroI or inuence a cIienl
and/or persons on whose behalf a transaction is being conducted, and includes a person who exercises ultimate
eeclive conlroI over a IegaI erson or arrangemenl.
For clients other than individuals or trusts: Intermediaries are required to take reasonable measures to verify the
identity of the:
i. natural person, who, whether acting alone or together, or through one or more juridical person, exercises
control through ownership or who ultimately has a controlling ownership interest in the client Controlling
ownership interest means ownership of/entitlement to:
a) more lhan 25% of shares or cailaI or rohls of lhe |uridicaI erson, vhere lhe |uridicaI erson is a
company,
b) more lhan 15% of lhe cailaI or rohls of lhe |uridicaI erson, vhere lhe |uridicaI erson is a
partnership, or
c) more lhan 15% of lhe roerly or cailaI or rohls of lhe |uridicaI erson, vhere lhe |uridicaI erson
is an unincorporated association or body of individuals
ii. In cases where there exists a doubt as to whether the person with the controlling ownership interest, as
menlioned above, is lhe benehciaI ovner or vhere no naluraI erson exerls conlroI lhrough ovnershi
interests, the identity of the natural person exercising control over the juridical person through other means.
a) Control through other means can be exercised through voting rights, agreement, arrangements or in any
other manner.
b) Where no naluraI erson is idenlihed under cIauses menlioned above, lhe idenlily of lhe reIevanl naluraI
erson vho hoIds lhe osilion of senior managing ociaI.
Fnr c!icnt which is a trust: Where lhe cIienl is a lrusl, lhe inlermediary shaII idenlify lhe benehciaI ovners of lhe
cIienl and lake reasonabIe measures lo verify lhe idenlily of such ersons, lhrough lhe idenlily of lhe seuIer of
lhe lrusl, lhe lruslee, lhe roleclor, lhe benehciaries vilh 15% or more inleresl in lhe lrusl and any olher naluraI
erson exercising uIlimale eeclive conlroI over lhe lrusl lhrough a chain of conlroI or ovnershi.
Exemption in case of listed companies: Where the client or the owner of the controlling interest is a company
listed on a stock exchange, or is a majority-owned subsidiary of such a company, it is not necessary to identify and
verify lhe idenlily of any sharehoIder or benehciaI ovner of such comanies.
Applicability for foreign investors: Inlermediaries deaIing vilh foreign inveslors' viz., Ioreign InslilulionaI
Inveslors, Sub Accounls and QuaIihed Ioreign Inveslors, may be guided by lhe cIarihcalions reviousIy issued
vide SII's circuIar daled Selember 5, 2012, for lhe urose of idenlihcalion of benehciaI ovnershi of lhe cIienl.
All registered market intermediaries have been directed to review their Know Your Client (KYC) and Anti-Money
Laundering (AML) policies accordingly.
124
Stock exchanges and depositories also
conducted trainings/seminars for their
members lo sensilize lhem lovards lhe
signihcance of AML/CIT framevork and lhe
need to ensure continuous compliance with it.
C. International co-operation on AML/CFT
related issues:
SEBI has consistently been in touch with
the global bodies and other Indian regulators
in ils aueml lo kee reguIalory framevork
for AML robust in the Indian securities
markels. SII ociaIs as arl of lhe Indian
Government delegation participated in the
plenary and working group meetings of
FATF and Eurasian Group on Combating
Money Laundering and hnancing of lerrorism
(EAG), which is a FATF-style regional body
(FSRB) and sets standards and promotes
eeclive imIemenlalion of IegaI, reguIalory
and operational measures for combating
money Iaundering, lerrorisl hnancing and
other related threats to the integrity of the
inlernalionaI hnanciaI syslem.
In order to protect the international
financial system from money laundering
and hnancing of lerrorism (ML/IT) risks and
to encourage greater compliance with the
AML/CFT standards, the Financial Action
Task Iorce (IATI) idenlihes |urisdiclions lhal
have slralegic dehciencies and vorks vilh
lhem lo address lhose dehciencies lhal ose
a risk lo lhe inlernalionaI hnanciaI syslem.
The names of these jurisdictions are made
public as part of a FATF Public Statement.
As required by the FATF Recommendations,
the Ministry of Finance, Government of India
(GoI) circulates the FATF Public Statements to
all regulators with an advice to disseminate
lhe same lo aII hnanciaI inslilulions under
their supervision for applying enhanced
due diligence measures when dealing with
clients from these high-risk jurisdictions. In
the year 2012-13, SEBI circulated three such
FATF Public Statements dated June 22, 2012,
October 19, 2012 and February 22, 2013 to
registered intermediaries for their compliance.
The Eurasi an Group (EAG) had
instituted a typology research project on topic
Money Laundering through the Securities
Market and Securities and Exchange Board
of India (SEBI) was assigned leadership of
this project in March 2011. In this regard,
SII resenled lhe hndings of lhe ro|ecl,
based on information received from various
member jurisdictions, in the meetings of EAG
plenary held in May 2012 and November
2012.
4. SURVEILLANCE
I. Market Surveillance Mechanism
The key objective of surveillance is the
prevention and investigation of abusive,
manipulative or illegal trading practices in the
securities markets. Market surveillance aims
to ensure orderly markets, where buyers and
sellers are willing to participate because they
feeI conhdenl in lhe fairness and accuracy of
transactions. In Indian context, the primary
responsibility of market surveillance has been
entrusted to the stock exchanges and in order
lo ensure eeclive surveiIIance by exchange,
independent surveillance cells have also been
established in stock exchanges. The objective
of surveillance is to ensure that these cells
are funclioning in a desired and eeclive
manner.
At SEBI, the Integrated Surveillance
Department (ISD) is in charge of overall
market surveillance and scope of its activities
includes monitoring market movements and
detecting potential breach of Regulations,
125
analysing the trading in securities and
initiation of appropriate action wherever
warranted.
II. Integrated Market Surveillance
System (IMSS)
Integrated Market Surveillance System
(IMSS) continues to provide SEBI assistance
in monitoring the securities market and
in discharging its regulatory functions
eecliveIy. The syslem kees lrack of markel
aberrations and generates alerts on a daily
basis. The aIerls are anaIyzed eriodicaIIy
and vherever varranled cases are idenlihed
for investigation and for further action. The
purpose of this exercise is to promote market
integrity and to ensure orderly conduct of the
market.
During the year, SEBI upgraded the
IMSS system to handle more than 2 billion
records in a day. To further enhance the
system capability and performance of alert
generation process, implementation of rolling
benchmark and markel sIiuing mechanism
are underway.
III. Data Warehousing and Business
Intelligence System (DWBIS)
DWIS ro|ecl is conceluaIized as lhe
nexl IogicaI sle of IMSS lo modernize SII's
intelligence and surveillance capabilities and
comprises of data warehouse, data mining
and business intelligence tools. It consists of
three phases as:
Ihase-I a singIe source of markel dala
and enables users to generate multi
dimensional reports dynamically.
Ihase-II severaI auern recognilion
modules and predictive modeling
scenarios.
Ihase-III various reorls lo heI
research initiatives.
Presently Phase I and II are fully
operational. Phase III is also complete and has
been released for User Acceptance Test (UAT).
IV. 5ignicant markct mnvcmcnts
during 2012-13
Major market movements in terms of
percentage change are given below:
a. On July 26, 2012, few mid cap scrips fell
by 20 percent, while the scrip M/s. Tulip
TeIecom Lld. vilnessed a signihcanl faII
of 46.5 percent.
b. On October 05, 2012, Nifty fell from 5815
to 4888 (15.9 percent) intraday due to
placement of erroneous sell order by one
of the member of NSE. However, Nifty
recovered later during the day to close at
5747.
c. On February 25, 2013, few mid cap scrips
fell in the range of 17 to 32 percent,
while the scrip M/s. Core Education &
TechnoIogies Lld. vilnessed a signihcanl
fall of 66.5 percent.
V. Surveillance Actions
During financial year 2012-13, NSE
initiated preliminary examination and
investigation in 85 cases and BSE initiated
preliminary examination and investigation in
885 cases. Apart from above, as surveillance
aclion, during hnanciaI year 2012-13 NSI
shifted 336 scrips to trade to trade (T to T)
segment and similarly BSE shifted 1,151 scrips
to trade to trade (T to T) segment. In this
segmenl scris are lraded and seuIed lhrough
mandatory delivery and no netting off
positions are allowed. This leads to reduction
in the amount of speculation as only those
who can deliver the securities can enter into
sale transactions and thereby speculation is
reduced. Further, with a view to dampen
the amplitude of prices, scrips shifted to
126
T to T segment attract applicable circuit
filters. NSE reduced circuit filter in 693
instances and BSE in 1,652 instances. Further,
NSI and SI verihed 94 and 100 rumours,
respectively (Table 3.19). MCX-SX being a
new exchange in equities, has not initiated
any such aclion during hnanciaI year 2012-
13 except shifting of one scrip from rolling
seuIemenl lo T lo T segmenl and reduced
circuil hIlers in 41 inslances.
VI. Surveillance Measures
SEBI conducts meetings at regular
intervals with stock exchanges to monitor
their surveillance activities and market
movements. In consultation with the stock
exchanges, the following surveillance
measures have been taken:
a. SEBI has advised the Exchanges to
put a penalty of ` 10,000 (Rupees ten
thousand only) on brokers who are
uuing lrades vilhoul uIoading UCC
and PAN details.
b. Companies are required to make
di scl osures i n respect of pri ce
sensi t i ve i nf or mat i on t o st ock
exchanges particularly flowing from
SEBI (Prohibition of Insider Trading
(PIT)) Regulations, 1992 and Listing
agreement. SEBI advised the exchanges
lo ul in Iace a secure mode of hIing
of information so that the authenticity
of the source of the information is
ascertained by the exchanges before
disseminating the same.
c. In order to discharge their surveillance
responsi bi l i ti es effecti vel y, SEBI
has reviewed and strengthened the
Surveillance Committee of the stock
exchanges.
d. SEBI has mandated all Exchanges
to disseminate for each derivative
stock, the combined open position
of group of connected entities on the
respective Exchange website twice a
month without disclosing the individual
names. The criteria for determining
connected entities and methodology for
dissemination of combined positions
have also been prescribed by SEBI.
e. In order to arrest any further misconduct
in the market by trading entities, it was
decided that the exchanges shall issue
observalion Ieuer/caulion Ieuer lo such
entities whose behaviour is found to be
aberrant and prima facie does not appear
to be in conformity with the extant
securities law governing the securities
market.
Table 3.19: Surveillance Actions during 2012-13
Nature of Action NSE BSE MCX-SX
1 2 3 4
Scrips shifted to Trade to Trade segment 336 1,151 1
(311) (1,053) (Na)
No. of scrips in which price bands were imposed 693 1,652 41
(2 percent, 5 percent & 10 percent) (613) (885) (Na)
Preliminary Investigations taken up 85 885 Nil
(116) (914) (Na)
Rumours verihed 94 100 NiI
(104) (115) (Na)
* Note: Figures in parentheses pertains to 2011-12
127
f. SEBI advised the exchanges to put in
place systems to prevent leakage of
information.
g. As a surveillance measure the exchanges
were advised to apply price bands on
stocks which do not have derivative
products available on them but are
forming part of the index on which
derivative products are available, in
case such stock witness sharp intraday
movements.
VII. Enforcement Actions
A. Interim orders:
a. Intcrim nrdcr in thc maucr nI pricc Ia!!
in certain scrips on July 26, 2012
On July 26, 2012, SEBI noticed an
abrupt downward movement in prices of
certain scrips namely M/s. Pipavav Defence
and Offshore Eng. Ltd., M/s. Parsvanath
Developers Ltd., M/s. Tulip Telecom Ltd.
and M/s. Glodyne Technoserve Ltd. as
compared to their closing prices on July
25, 2012 at NSE and BSE. After preliminary
analysis, SEBI, vide its order dated August
03, 2012 banned 19 entities from accessing
securities market and prohibiting them from
buying, selling or dealing in securities in any
manner whatsoever, till further directions
in lhe mauer. Iursuanl lo lhe above, afler
considering the submissions made by these
19 entities, SII has conhrmed ils direclions
against eight entities.
b. Interim order in the matter of M/s.
Ruchi Soya Industries Ltd.
SEBI carried out an examination in the
scrip of M/s. Ruchi Soya Industries Ltd. in
view of surveillance alerts regarding marking
lhe cIose'. The acl of arlihciaIIy imacling
the closing price in cash market, which acts
as lhe seuIemenl rice in derivalive markel
is known as marking the close in common
parlance. Examination, prima facie, revealed
that certain connected entities indulged in
marking the close by moving the closing
price of the said scrip in the cash market in
an arlihciaI, maniuIalive and unfair manner
and thereby made unlawful gain on the long
positions held by them in futures of the scrip.
SEBI, passed an interim order dated
February 15, 2013 against nine connected
entities restraining them from accessing
securities market and prohibiting them from
buying, selling or dealing in securities in any
manner whatsoever, till further directions in
lhe mauer of deaIing in lhis scri. Oorlunily
to these entities to submit their submissions in
lhe mauer has been given.
c. Interim order in the matter of M/s.
Zenith Infotech Ltd.
SEBI observed that M/s. Zenith Infotech
Ltd. (ZIL) raised US$ 33 & US$ 50 million
by issuing FCCBs which were due for
redemption in September 2011 and August
2012, respectively. ZIL in its EGM held on
January 29, 2011 took approval from its
shareholders to sell its assets for repayment/
redemption of FCCBs due for maturity.
On September 26, 2011, ZIL announced to
exchanges that it has sold one of its divisions,
(Managed Services Division) MSD, to Zenith
RMM LLC.
Examination, prima facie, revealed
that the substantial portion of sale proceeds
of MSD Division of ZIL was diverted in a
devious manner for lhe benehls/inleresls of
promoters and/or directors and subsidiaries
which was not remotely connected to the
aulhorizalion of lhe sharehoIders. Iromolers/
128
direclors of ZIL have auemled lo lake avay
the assets of a listed company directly and
indireclIy for lheir ovn benehl or for benehl
of entities owned and controlled by them,
thereby causing loss to shareholders.
SEBI, passed an interim order dated
March 25, 2013 against 6 promoters of ZIL
restraining them from accessing securities
market and prohibiting them from buying,
selling or dealing in securities in any manner
whatsoever, till further directions in the
mauer. Iurlher, lhe board of direclors of ZIL
is directed to furnish, within 30 days, bank
guarantee(s) of a minimum tenure of one
year, for USD 33.93 million (i.e. the amount
of sale proceeds of MSD Division that has
been diverted), in the name of SEBI, without
using the funds of ZIL or creating any charge
on assets of ZIL. The bank guarantee may
be invoked in case any adverse inference is
dravn by SII in ils hnaI order vilh regard
to the actions of Board of directors/promoters
of ZIL in diverting the sale proceeds of MSD
Division and SEBI deems it necessary to
compensate.
B. Adjudication Orders:
a. Ad|udicatinn nrdcrs in thc maucr nI
M/s. S J Corporation Ltd.
Adjudication orders dated April 30,
2012 and }une 20, 2012 in lhe mauer of M/s.
S J Corporation Ltd. was passed wherein, a
penalty of ` 50,000 (Ruees hfly lhousand
only) each on M/s. India Advantage Securities
Ltd. and M/s. Inventure Growth & Securities
Ltd. were imposed for violation of provisions
of clause A (2) of the code of conduct for
slock brokers secihed under ScheduIe II read
with regulation 7 of SEBI (Stock Brokers and
Sub-brokers) Regulations, 1992.
b. Ad|udicatinn nrdcr in thc maucr nI M/s.
DFM Foods Ltd.
Adjudication order dated November 29,
2012 in lhe mauer of M/s. DIM Ioods Lld.
was passed wherein a penalty of ` 1,50,000/
(Ruees one Iakh hfly lhousand onIy) on Mr.
Mohit Satyanand was imposed for violation
of Regulation 13(4) read with13(5) of SEBI
(PIT) Regulations, 1992 and Clause 4.2 of
Schedule I of Model Code of Conduct for
Prevention of Insider Trading for Listed
Companies.
c. Ad|udicatinn nrdcr in thc maucr nI M/s.
A V Cotex Ltd.
Adjudication order dated May 28, 2012
in lhe mauer of M/s. A V Colex Lld. vas
passed wherein a penalty of ` 25,000 (Rupees
lvenly hve lhousand onIy) each on Mr. Anu|
Dhawan, M/s. Conchem Construction Pvt.
Ltd, M/s. Lee Infratech Pvt. Ltd. (Erstwhile,
M/s. Lee Hotels Pvt. Ltd.), Ms/. Jas Expoship
Pvt. Ltd., M/s. ADB Trade Services Pvt. Ltd.
and Ms/. Competent Surveyors Pvt. Ltd. was
imposed for violation of Regulation 13 (1),(3)
&(4) read with regulation 13(5) of SEBI (PIT)
Regulations, 1992.
d. Ad|udicatinn nrdcr in thc maucr nI M/s.
GHCL Ltd.
Adjudication order dated August 17,
2012 in lhe mauer of M/s. GHCL Lld. vas
passed wherein a penalty of ` 25,000 (Rupees
lvenly hve lhousand onIy) vas imosed on
Mr. Pramod Jain for violation of Regulation
13(2) & (4) of SEBI (PIT) Regulations, 1992.
e. Adjudication orders against four
entities in the matter of M/s. Fact
Enterprises Ltd.
Adjudication orders dated January 11,
2012 and November 08, 2012 in lhe mauer of
129
M/s. Fact Enterprises Ltd. were passed wherein
a penalty of ` 1,00,000 (Rupees one lakh only)
each on Mr. Homiyar Iiroze Mislry, Mr. Uday
Chander Mohite and Mrs Urmila Lakhotia
and ` 1,75,000 (Rupees one lakh seventy
hve lhousand onIy) on Mr. Ra|iv Ra|aram
Kashyap was imposed for violation of SEBI
(PIT) Regulations, 1992 and SEBI (SAST), 1997.
I. Ad|udicatinn nrdcrs in thc maucr nI
M/s. Clutch Auto Ltd.
Adjudication orders dated August 17,
2012 and November 01, 2012 in lhe mauer of
M/s. Clutch Auto Ltd. were passed wherein a
penalty of ` 1,00,000 (Rupees one lakh only)
was imposed on Mr. Hari Krishna Yannam for
violation of Regulation 4(2) (b) and 4(2)(g) of
SEBI (Prohibition Of Fraudulent And Unfair
Trade Practices relating to Securities Market
(PFUTP)) Regulations, 2003.
g. Ad|udicatinn nrdcr in thc maucr nI M/s.
Sigrun Holdings Ltd.
Adjudication order dated January 18,
2013 in lhe mauer of M/s. Sigrun HoIdings
Ltd. was passed wherein a penalty of
` 2,00,000 (Rupees two lakh only) was
imposed on Mr. C R Rajesh Nair for violation
of Reg. 13(4) of SEBI (PIT) Regulations, 1992.
h. Ad|udicatinn nrdcr in thc maucr nI M/s.
Concurrent (India) Infrastructure Ltd.
Adjudication order dated November
30, 2012 in lhe mauer of M/s. Concurrenl
(India) Infrastructure Ltd. was passed
wherein a penalty of ` 50,000 (Rupees
hfly lhousand onIy) on lhe said enlily vas
imposed for violation of Clause 35 of the
Listing Agreement read with Section 21 of
the Securities Contracts Regulations Act
(SCRA), 1956. Penalty of ` 3,25,000 (Rupees
lhree Iakh lvenly hve lhousand onIy) on
Ms. K Nirmala for violation of Regulations
8(A)(2) and 8(A)(3) of SEBI (SAST)
Regulations, 1997; Regulations 29(2) read with
29(3), 31(2) read with 31(3) of SEBI (SAST)
Regulations, 2011; and Regulations 13(3) read
with 13(5),13(4A) read with 13(5) of SEBI
(PIT) Regulations, 1992. Penalty of ` 3,00,000
(Rupees three lakh only) was imposed on Mr.
K Nirupama for violation of Regulations 8(A)
(2) and 8(A)(3) of SEBI (SAST) Regulations,
1997; and Regulations 13(3) read with 13(5) of
SEBI (PIT) Regulations, 1992.
i. Ad|udicatinn nrdcr in thc maucr nI M/s.
MTZ Pn!y!ms Ltd.
Adjudication order dated March 5, 2013
in lhe mauer of M/s. MTZ IoIyhIms Lld.
was passed wherein a penalty of ` 5,00,000
(Ruees hve Iakh onIy) vas imosed on Mr.
Sanjay Bajranglal Sharma for violation of
Regulation 7(1),(2) of SEBI (SAST) Regulations
and Regulation 13(3), (5) of SEBI (PIT)
Regulation, 1992.
|. Ad|udicatinn nrdcr in thc maucr nI M/s.
Livingroom Lifestyle Ltd.
Adjudication order dated October
31, 2012 in lhe mauer of M/s. Livingroom
Lifestyle Ltd. was passed wherein a penalty
of ` 25,000 (Ruees lvenly hve onIy) each
on M/s. }MD TeIehIms induslries Lld and Mr.
Avishek Bose and ` 45,000 (Rupees fourty
hve lhousand onIy) on M/s. GuIislan vani|ya
Private Ltd was imposed for violation of SEBI
(SAST) and SEBI (PIT) Regulations, 1992.
k. Ad|udicatinn nrdcr in thc maucr nI M/s.
Veer Energy Infrastructure Ltd.
Adjudication order dated February
20, 2013 in lhe mauer of M/s. Veer Inergy
Infrastructure Ltd. was passed wherein a
penalty of ` 1,00,000 (Rupees one lakh only)
each was imposed on Mr. Dhrenendra Shah
130
for violation of Regulation 13(4) read with
Regulation 13(5) of SEBI (PIT) Regulations,
1992 and Mr. Jaswantilal Shah for violation
of Regulation 13(3) read with Regulation 13(5)
of the SEBI (Prohibition of Insider Trading)
Regulations, 1992.
!. Ad|udicatinn nrdcr in thc maucr nI M/s.
Allied Computers International (Asia)
Ltd.
Adjudication order dated June 06, 2012
in the matter of M/s. Allied Computers
International (Asia) Ltd. was passed wherein
a penalty of ` 3,00,000 (Rupees three lakh
only) was imposed on Mr. Hirji Kanji Patel
for violation of Section 15A (b) of SEBI Act
and provisions of Regulation 7(1A) read with
Regulation 7(2) of SEBI (SAST) Regulations,
1997 and Regulation 13(4) read with Regulation
13(5) of SEBI (PIT) Regulations.
m. Ad|udicatinn nrdcr in thc maucr nI M/s.
Ind-5wiIt Labnratnrics Ltd.
18, 2013 in the matter of M/s. Ind-Swift
Laboratories Ltd. was passed wherein a
penalty of ` 10,00,000 (Rupees ten lakh only)
was imposed on Mr. Balwinder Singh for
violation of provisions of Regulation 3 and
Reg. 4(2)(g) of the SEBI (PFUTP) Regulations,
2003.
n. Ad|udicatinn nrdcr in thc maucr nI M/s.
Atlanta Ltd.
20, 2013 was passed wherein a penalty of
` 48,26,500 (Rupees fourty eight lakh twenty
six lhousand hve hundred onIy) vas imosed
on Mr. Shadilal Chopra who failed to comply
with the directions issued by SEBI under
section 11B of the SEBI Act, 1992 read with
Regulation 11 of SEBI (PFUTP) Regulations,
2003.
5. INVESTIGATION
Timely completion of investigation cases
and eeclive, roorlionale and dissuasive
action in case of violations of established
securities laws is important for protection
of investors interest and ensuring fair,
transparent and orderly functioning of the
market. It is also vital for improving the
conhdence in lhe inlegrily of lhe securilies
market. SEBI is therefore constantly striving
to upgrade its investigative skills by making
use of Information Technology. Importance
of eeclive and credibIe use of invesligalion
has also been underscored by IOSCO in its
Principles for the Enforcement of Securities
Regulation.
Keeping the above objectives and
principles of securities regulations in view,
SEBI initiates investigation to examine alleged
or suspected violations of laws and obligations
relating to securities market. The possible
violations may include price manipulation,
crealion of arlihciaI markel, insider lrading,
capital issue related irregularities, takeover
related violations, non-compliance of disclosure
requirements and any other misconduct in the
securities markets.
I. Initiation of Investigation
There are various sources of information
for initiation of investigation. SEBI initiates
investigation based on reference received
from sources such as stock exchanges,
internal surveillance department, other
government departments, information
submitted by market participants and
compl ai nant s. In appropri at e cases,
investigation may also be initiated suo-moto,
where there are reasonable grounds to believe
those investors interests are being adversely
aecled or lhere is a susecled vioIalion of
the provisions of the securities laws.
131
investigations have been completed. Apart
from enforcement action, an important
attendant benefit resulting from such
investigations is contribution to the policy
changes with a view to further strengthen
the regulatory and enforcement environment.
During 2012-13, 155 new cases were taken
up for investigation and 119 cases were
completed (Table 3.20 and Chart 3.3).
A. Nature of Investigation Cases Taken Up
During 2012-13, about 55 percent of the
cases taken up for investigation pertain to
market manipulation and price rigging, as
against about 47 percent of such cases in the
previous year. Other cases pertain to insider
trading, takeover violations, irregularities
in capital issues, and other violations of
securities laws. Since, several investigation
cases involve multiple allegations of
vioIalions, valer-lighl cIassihcalion under
secihc calegory becomes dicuIl. Therefore,
II. Process of Investigation
The steps involved during investigation
process include an analysis of market data
(order and trade log, transaction statements
etc.) and static data (KYC documents obtained
from brokers, depository participants etc.,
bank records, hnanciaI resuIls, evenls around
major corporate developments etc.) The
purpose of such investigation is to gather
evidence and to identify persons/ entities
behind irregularities and violations so that
appropriate and suitable regulatory action
can be taken, wherever required. Outcome
of investigation in the form of enforcement
action is a clear signal to the market players
to comply with the law and expected
standards of conduct in the market.
III. Trends in Investigation Cases
Since 1992-93, SEBI has undertaken
1,772 investigation cases. In 1,539 cases,
132
cases vere cIassihed on lhe basis of main
charge / violations (Table 3.21 and Chart 3.4).
Table 3.20 Investigations by SEBI
(Numbers)
Year
Cases Taken up Cases
for Investigation Completed
1 2 3
1992-93 2 2
1993-94 3 3
1994-95 2 2
1995-96 60 18
1996-97 122 55
1997-98 53 46
1998-99 55 60
1999-00 56 57
2000-01 68 46
2001-02 111 29
2002-03 125 106
2003-04 121 152
2004-05 130 179
2005-06 159 81
2006-07 120 102
2007-08 25 169
2008-09 76 83
2009-10 71 74
2010-11 104 82
2011-12 154 74
2012-13 155 119
Total 1772 1539
B. Nat ure of Invest i gat i on Cases
Completed
During 2012-13, about 44 percent of
the cases completed pertain to issue related
to manipulation and 34 percent of the cases
completed pertain to market manipulation
and price rigging. Other cases in which
investigation was completed pertain to
insider trading, takeovers etc. The details of
investigation cases taken up and completed
are provided in Table 3.21, Chart 3.4 and
Chart 3.5.
IV. Regulatory Action
After completion of investigation, penal
action is initiated as approved by the
competent authority wherever violations of
laws and obligations relating to securities
market is observed. Action is decided based
on the principles of objectivity, consistency,
materiality and quality of evidence available,
after thorough analysis and appreciation of
facts.
The action included issuing warning
letters, initiating enquiry proceedings
for registered intermediaries, initiating
adjudication proceedings for levy of monetary
penalties, passing directions under Section 11
133
Table 3.21: Nature of Investigations taken up and completed
(Number)
Particulars
Investigations Taken up Investigations Completed
2011-12 2012-13 2011-12 2012-13
1 2 3 4 5
Market manipulation and price rigging 73 86 37 41
"Issue" related manipulation 35 43 4 52
Insider trading 24 11 21 14
Takeovers 2 3 2 2
Miscellaneous 20 12 10 10
Total 154 155 74 119
of SEBI Act, 1992, and initiating prosecution
and referring matter to other regulatory
agencies.
SEBI issued 168 Prohibitive directions
during the year 2012-13. These directions
have the strong and salutary effect of
delerrence and aIso acl as an eeclive looI
to deal with emergent situations requiring a
timely and faster response. A detailed break
up of all regulatory actions is given in Table
3.22 and Chart 3.6.
Further, proceedings under Section
11 of SEBI Act, 1992 were initiated against
128 enti ti es, and proceedi ngs under
Intermediaries Regulations were initiated
Table 3.22: Type of Regulatory actions taken
during 2012-13
Particulars Number
of Entities
1 2
Suspension 31
Warning issued 9
Prohibitive directions issued under 168
Section 11 of SEBI Act (other than
consent orders)
Cancellation 3
Adjudication orders passed 485
Administrative warning / warning
Ieuer issued 31
Dehciency observalions issued 14
Advice Ieuer issued 23
Total 764
134
agai nst 19 enti ti es and adj udi cati on
proceedings were initiated against 713 entities
in 2012-13. In addition to above, Show Cause
Notices were issued against 206 entities for
the proceedings under Section 11 of SEBI
Acl, 1992. In invesligalion mauers, foIIoving
orders have been passed by SEBI in 2012-13.
A. Orders under Section 11B of SEBI Act,
1992
a. Based on the complaints received
regarding cheating and misappropriation
of several crores of Rupees by M/s
Stock Guru India, SEBI had initiated
examination in the said matter. The
activity of M/s Stock Guru appeared
to be a Multi Level Marketing (MLM)
Scheme. However, SEBI found that one of
its group companies, M/s. SGI Research
and Analysis Ltd., issued convertible
preference shares of ` 10/- each at a
premium of Rs.1,500 per share to more
than 50 investors, thereby, violating
Regulation 4(2), 5(1), 5(7), 6, 7, 25, 26,
46 and 59 of SEBI (ICDR) Regulation
and Regulation 3(b), 4(1) and 4(2)(r) of
SEBI(PFUTP) Regulations. Thereafter,
11B Order was passed on January 11,
2013 restraining M/s SGI Research and
Analysis Ltd. and its 7 directors from
accessing the securities market and
further prohibited from buying, selling or
otherwise dealing in securities and being
associated with the securities market
directly or indirectly for a period of 10
years. The Order further directed the
company and its directors to refund the
money collected towards subscription
of convertible preference shares to the
subscribers of M/s. SGI Research and
Analysis Ltd. along with the interest of
15 percent per annum.
b. M/s Sarang Chemicals Limited was
debarred for a period of two years in
the matter of M/s Sarang Chemicals
Limited for publishing misleading
corporate announcements, incorrect
financial results, wrong shareholding
auern, lhe comany had faiIed lo make
relevant disclosures regarding change
in shareholding as required by the
SEBI (Substantial Acquisition of Shares
and Takeovers) Regulations, 1997 and
SEBI (Prohibition of Insider Trading)
Regulations, 1992, etc.
135
B. Adjudication Orders
a. The promoters of Bank of Rajasthan
(BoR) in compliance with RBI Guidelines
disclosed that they have reduced their
shareholding in BoR from 44.18 percent
in June 2007 to 28.61 percent in December
2009 of the issued capital. However, in the
garb of reduction, they had transferred
lheir shares in o-markel lo M/s TayaI /
Yadav / Silvassa Group entities who were
their PACs (persons acting in concert).
Instead of reduction from 44.18 percent
to 28.61 percent the promoters along
with PACs (Tayal, Silvassa and Yadav
Groups) increased their shareholding
from 44.18 percent in quarter ended June
2007 to 63.15 percent in quarter ended
December 2009. The disclosures of the so
called reduced promoters holding were
disseminated in the market by way of
rouline hIing vilh lhe slock exchanges.
Summons were issued to all promoter
of BoR, M/s Tayal Group, M/s Yadav
Group and M/s Silvassa Group entities
however they did not co-operate with the
investigation. Adjudication proceedings
were initiated against 142 entities for
violation of SEBI (PFUTP) Reg., SEBI
(SAST) Reg., SEBI (PIT) Reg. and non
compliance of summons. Adjudication
proceedings were completed against
141 entities and a total penalty of Rs
29,97,50,000 was imposed.
b. SEBI had levied penalty of ` 5 lakh in
resecl of Mr. }aIa| alra in lhe mauer of
M/s Betala Global Securities Limited for
unfair trade practices indulged in by Mr.
Jalaj Batra through brokers in connivance
with other entities of M/s Mahesh Mistry
Group.
C. Enquiry Proceedings
a. Based on the reference received from the
oce of AddilionaI Deuly Commissioner
of Police, Crime Branch, New Delhi
stating that Mr. B B Sharma, the promoter
of M/s Hoand Grou of Comanies has
disclosed the details of stock exchanges
lickels heId by him in dierenl names
and lhal lhe amounl uliIized for lhe
purchase of the tickets of various stock
exchanges was diverted from the money
collected from the public by the M/s
Hoand Grou of Comanies, Inquiry
proceedings were initiated against several
brokers including M/s. Spurt Fincap Ltd.
b. Investigation revealed that the funds for
purchase of LSE tickets by M/s. Spurt
Iinca Lld. vere hnanced by lvo M/s
Hoand Grou Comanies viz., M/s
Hoand IinanciaI Services and M/s MaiI
Order Share Shoppe. M/s. Spurt Fincap
Ltd. had acted in collusion with M/s
Hoand Grou in oblaining membershi
of LSE and is associated /linked with the
M/s Hoand Grou. Hence, M/s. Surl
Iinca Lld. has nol been lrealed as 'hl
and proper person within the benchmark
prescribed in regulation 3(2) (a) and
3(2)(h) of the Fit and Proper Persons,
Regulations, 2004 as well as Schedule II of
the Intermediaries Regulations, 2008. M/s.
Spurt Fincap Ltd. has violated regulation
5(e) and regulation 5A of the Stock
Brokers Regulations read with Fit and
Proper Persons, Regulations, 2004 and
Schedule II read with regulation 38(3) of
the Intermediaries Regulations. Therefore,
the certificate of registration granted
to the stock broker, M/s Spurt Fincap
Ltd. Member, Ludhiana Stock Exchange
Limited and having SEBI registration
no. INB 120944137 has been cancelled
vide order dated March 25, 2013.
136
c. In lhe mauer of M/s Adilya Infosofl Lld. -
vide order daled 25/03/2013, Cerlihcale of
Registration of M/s. Shri Parshwa Finance
sub-broker aIialed lo broker }yolish
Bhogilal Stock Brokers Pvt. Ltd. was
cancelled. The noticee and its connected
entities created false and misleading
appearance of trading in the securities
market thereby inducing the sale or
purchase of the shares of the company.
The noticee was also found to be repeated
defaulter.
d. In lhe mauer of M/s Sun Infovays Lld.
Vide Order dated 30/01/2013, M/s Angel
Broking Limited was prohibited from
taking up any new assignment (i.e. not
to take up any new clients) for a period
of two weeks. The noticee had aided
and abeued ils cIienl in lhe crealion of
arlihciaI voIume in lhe scri of SIL in
violation of the provisions of Regulation
4(b) and (d) of the PFUTP Regulations.
e. In lhe mauer of Sun Infovays Lld. Vide
Order dated 30/01/2013, certificate of
registration of M/s NCJ Share and Stock
Brokers Ltd. was suspended for a period
of one week. The noticee while trading
in its proprietary account has dealt in
the scrip of SIL in a manner detrimental
to the interest of investors. Such acts
threaten the market integrity and orderly
development of the market and call for
regulatory intervention to protect the
interest of investors as the same pose
serious threat to the price discovery
mechanism of the stock exchange and
the safety of the securities market
mechanism.
V. Fn!!nw-up nI Invcstigatinns
After completion of investigation, the
Investigation Department is also actively
involved in post-investigation enforcement
actions and quasi-judicial proceedings. Such
actions include issuing show cause notices
to the entities, examining their replies,
organising and participating in the hearings of
the entities before the Whole Time Members
of SEBI, co-ordination with Enforcement
Department (EFD), preparing draft orders,
issuing press releases after orders are
assed, auending briehngs of advocales and
replying to their queries, co-ordination with
Enforcement Department in the proceedings
before Securities Appellate Tribunal (SAT) and
before courts, co-ordination with Prosecution
Department for cases filed in the courts,
follow-up for collection of penalty after orders
assed by Ad|udicaling Ocers, inilialing
prosecution for non-payment of penalties,
processing of consent proposals filed by
the entities, etc. Timely and qualitative
completion of such actions is also important
for ensuring lhe eecliveness of reguIalory
measures taken by SEBI.
6. ENFORCEMENT OF
REGULATIONS
Effective enforcement in the form of
eeclive foIIov-us and disciIinary aclions
makes a reguIalory syslem eeclive.
I. Enforcement Mechanisms
There are hve enforcemenl mechanisms
that SEBI uses in case of any violation(s)
pertaining to the laws regulating the
securities market. Age-wise analysis of
enforcemenl aclion delaiIs viz. aclions
u/s 11, 11B and 11D of SEBI Act, enquiry
proceedings, adjudication proceedings,
prosecution proceedings and summary
proceedings as on March 31, 2013 are
provided in Tables 3.23 to Table 3.23d.
137
A. Section 11/11B Proceedings
Under section 11/11B of SEBI Act, 1992,
SEBI may issue directions or prohibitive
orders such as debarment from accessing the
securities market or not to deal in securities.
In 2012-13, 142 cases under section 11/11B
vere disosed by SII. In lhe same hnanciaI
year, 184 fresh cases under the caption
provision of law were initiated by SEBI. The
cumulative pending cases as on March 31,
2013 were 1,016 (Table 3.23).
B. Enquiry Proceedings
SII may susend or canceI lhe cerlihcale
of registration of an intermediary through
Enquiry Regulations on the recommendation
of lhe enquiry ocer/designaled aulhorily
appointed for that purpose. It may also issue
warning to an intermediary if it considers that
lhe vioIalions commiued by lhe inlermediary
does not warrant suspension or cancellation
or registration.
In the financial year 2012-13, 36
cases were disposed by SEBI after the due
completion of enquiry proceedings. In the
same financial year, 27 fresh cases were
initiated where enquiry proceedings are being
followed. The cumulative pending cases as on
March 31, 2013 stands at 114. (Table 3.23)
C. Adjudication Proceedings
Under Chapter VIA of SEBI Act, 1992,
SII may aoinl an Ad|udicaling Ocer for
conducting enquiry and imposing penalties.
In 2012-13, 485 cases were disposed by
SEBI under adjudicating proceedings. In the
same hnanciaI year, 1,548 fresh cases vere
initiated under adjudicating proceedings. The
cumulative pending cases as on March 31,
2013 stands at 2,333 (Table 3.23b).
D. Prosecution
Tab!c 3.23: Agc-wisc Ana!ysis nI EnInrccmcnt Actinns U/5 11, 11B and 11D nI
SEBI Act as on March 31, 2013
No.
Number of Actions Disposed
of Ac- Aggre- Pen-
Year tions 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- gate ding
Initi- 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Dis- Cases
ated posal
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
1995-96 0 0 0 0 0
1996-97 3 3 0 0 3 0
1997-98 85 6 15 9 34 1 14 4 0 0 83 2
1998-99 51 9 9 26 7 0 0 0 51 0
1999-00 83 13 12 10 20 19 1 5 3 0 0 83 0
2000-01 461 269 18 45 49 28 1 2 2 15 0 3 4 0 436 25
2001-02 441 390 32 12 1 3 2 0 0 1 0 441 0
2002-03 321 58 74 30 21 8 21 30 24 7 25 0 298 23
2003-04 713 30 135 45 94 197 47 52 33 25 5 663 50
2004-05 522 2 38 39 168 105 85 19 46 3 505 17
2005-06 196 1 12 31 65 69 18 0 0 196 0
2006-07 402 34 67 65 119 54 15 1 355 47
2007-08 374 58 75 61 61 48 6 309 65
2008-09 75 8 44 23 0 0 75 0
2009-10 376 30 69 114 45 258 118
2010-11 346 30 87 37 154 192
2011-12 348 10 35 45 303
2012-13 184 10 10 174
Total 4,981 0 0 6 3 28 299 427 215 192 196 107 189 561 412 493 320 375 142 3,965 1,016
138
Tab!c 3.23a: Agc-wisc Ana!ysis nI EnInrccmcnt Actinns Enquiry Prncccdings as nn
March 31, 2013
No.
of Ac- Aggre- Pen-
Initi- 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Dis- Cases
ated posal
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
1995-96 8 8 0 8 0
1996-97 20 1 12 7 0 20 0
1997-98 66 3 48 7 5 1 2 0 66 0
1998-99 335 48 116 12 154 2 3 0 335 0
1999-00 69 27 1 18 19 1 1 0 2 69 0
2000-01 267 6 33 204 6 9 2 1 5 0 1 267 0
2001-02 204 35 83 49 16 11 4 6 0 0 204 0
2002-03 371 141 56 27 27 60 20 16 4 14 6 0 371 0
2003-04 476 21 71 115 82 83 28 48 14 8 6 476 0
2004-05 190 3 17 3 57 70 30 10 0 0 190 0
2005-06 80 9 31 19 8 13 0 0 80 0
2006-07 122 4 8 28 22 27 20 3 112 10
2007-08 89 3 11 8 14 4 11 51 38
2008-09 20 4 3 1 2 10 10
2009-10 23 1 5 0 4 10 13
2010-11 24 8 1 5 14 10
2011-12 8 0 0 0 8
2012-13 27 2 2 25
Total 2399 0 9 15 103 150 24 87 603 134 127 172 164 216 172 125 108 40 36 2285 114
Tab!c 3.23b: Agc-wisc Ana!ysis nI EnInrccmcnt Actinns - Ad|udicatinn Prncccdings as nn
March 31, 2013
No.
of Ac- Aggre- Pen-
Initi- 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Dis- Cases
ated posal
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
1995-96 2 1 1 2 0
1996-97 5 1 2 1 1 5 0
1997-98 16 3 2 1 1 7 2 16 0
1998-99 33 2 7 1 1 1 8 2 1 2 0 0 0 0 25 8
1999-00 32 9 7 3 2 4 2 2 3 0 0 0 0 32 0
2000-01 77 4 17 1 6 8 5 4 5 23 0 0 4 0 77 0
2001-02 64 16 14 4 14 2 6 5 0 1 1 0 63 1
2002-03 150 10 11 62 19 15 8 6 3 5 0 0 139 11
2003-04 577 52 344 55 66 8 27 9 3 0 0 564 13
2004-05 418 8 137 126 45 28 17 21 23 2 0 407 11
2005-06 283 27 47 22 66 23 56 10 6 257 26
2006-07 578 34 82 102 120 106 18 5 467 111
2007-08 1215 4 20 152 373 295 47 8 899 316
2008-09 546 70 101 255 42 51 519 27
2009-10 644 114 229 121 80 544 100
2010-11 571 284 257 30 571 0
2011-12 609 143 118 261 348
2012-13 1548 187 187 1361
Total 7368 0 0 1 6 9 16 43 29 85 581 242 218 181 473 764 1257 645 485 5035 2333
139
Section 24 of the SEBI Act, 1992
empowers SEBI to launch prosecution
against any person for contravention of any
provision of the SEBI Act, 1992 or any rules
or regulations made there under before a
court of criminal jurisdiction. In 2012-13, 22
roseculion cases hIed by SII vere disosed
by courts and 75 new cases were initiated.
The cumulative pending cases as on March
31, 2013 stands at 988. (Table 3.23c)
E. Summary Proceedings
Chapter VA of the SEBI (Intermediaries)
Regulations, 2008 provides the power to
conduct summary proceedings in certain
secihc cases. In 2012-13, no case for summary
proceedings were disposed as well as initiated
by SEBI. The cumulative pending cases as on
March 31, 2013 stands at 83 (Table 3.23d).
II. Enquiry and Adjudication
During 2012-13, SEBI initiated 1,548
adjudication and 27 enquiry proceedings
(Table 3.24).
Further, during 2012-13, 498 orders
assed or reorls submiued, of vhich 485
cases were adjudication proceedings and
13 cases were enquiry related. During 2012-
13, SEBI issued 658 show cause notices and
conducted 876 hearings (Table 3.24a).
As on March 31, 2013, 114 enquiry
proceedi ngs and 2, 333 adj udi cat i on
proceedings are pending with enquiry and
ad|udicaling ocers (TabIe 3.24b).
Duri ng 2012-13, SEBI i ssued 59
warning/deficiency/advice letters to other
intermediaries of which 29 were issued
against Depository Participants, 17 against
Merchanl ankers, hve againsl Credil Raling
Agencies and four each against Debenture
Tab!c 3.23c: Agc-wisc Ana!ysis nI EnInrccmcnt Actinns - Prnsccutinn Prncccdings as nn
March 31, 2013
No.
of Ac- Aggre- Pen-
Initi- 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Dis- Cases
ated posal
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
1995-96 9 1 1 1 3 6
1996-97 6 1 1 2 4
1997-98 8 1 1 1 1 4 4
1998-99 11 1 1 1 3 8
1999-00 25 1 1 1 2 5 20
2000-01 28 1 1 2 4 24
2001-02 95 3 4 4 1 2 14 81
2002-03 229 1 5 17 6 5 2 5 5 46 183
2003-04 480 1 5 29 29 5 15 15 33 11 143 337
2004-05 86 1 13 6 2 3 3 1 29 57
2005-06 30 3 2 1 6 24
2006-07 23 0 23
2007-08 40 1 1 2 38
2008-09 29 0 29
2009-10 30 0 30
2010-11 17 1 1 16
2011-12 29 0 29
2012-13 75 0 75
Total 1250 0 0 0 0 1 2 2 2 2 6 6 43 65 19 24 25 43 22 262 988
140
Tab!c 3.23d: Agc-wisc Ana!ysis nI EnInrccmcnt Actinns 5ummary Prncccdings undcr 5EBI
Act as on March 31, 2013
No.
of Ac- Aggre- Pen-
Initi- 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Dis- Cases
ated posal
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04 47 2 3 19 4 2 30 17
2004-05
2005-06 2296 230 79 11 1820 90 2230 66
2006-07 1 1 1 0
2007-08 1 1 1 0
2008-09 91 91 91 0
2009-10 0
2010-11 0
2011-12 0
2012-13 0
Total 2436 232 82 11 1932 94 2 2353 83
Trustees and RTI & STAs. Moreover, SEBI has
initiated adjudication proceedings against one
Debenture Trustees. There wasnt any enquiry
Table 3.24: Enqui ry and Adj udi cat i on
Proceedings Initiated during
2012-13
Particulars No of Cases
1 2
Enquiry Related 27
Adjudications 1,548
Total 1,575
Table 3.24b: Pending Enforcement Actions as
on March 31, 2013
Pcnding with Enquiry and Nn. nI
Ad|udicating Omccrs Cascs
1 2
Enquiry Related (excluding 114
summary proceedings)
Adjudications 2,333
Total 2,447
Table 3.24a: Enquiry and Adjudication
during 2012-13
Particulars Enquiry Adjudication Total
1 2 3 4
Orders Passed /
Reorl Submiued 13 485 498
Hearings Conducted 12 864 876
Show Cause Notices
Issued 12 646 658
proceedings initiated during 2012-13 against
other intermediaries (Table 3.25).
III. Regulatory Actions against CIS
A. M/s. MPS Greenery Developers Ltd.
(MPS)
The company was granted provisional
registration on August 21, 2009 for a period
of two years, subject to compliance of
various conditions stipulated in Regulation
71 of the SEBI (CIS) Regulations, 1999,
hereinafter referred as the Regulations.
141
due to the investors as per the terms of the
oer vilhin a eriod of one monlh from lhe
date of this order, failing which:
a. SEBI woul d i ni ti ate prosecuti on
proceedings against MPS under Section
24 of SEBI Act, 1992.
b. The promoters/ directors/ managers/
persons in charge of the business of the
scheme(s) of MPS would be restrained
from accessing the capital market and
prohibited from buying, selling or
otherwise dealing in the securities
market till all the monies are refunded.
c. A reference would be made to the State
Government/ local police to register a
civil/ criminal case against MPS and
its promoters/ directors for apparent
offences of fraud, cheating, criminal
breach of trust and misappropriation of
public funds.
d. A reference would be made to the
Minislry of Cororale Aairs, lo iniliale
the process of winding up of MPS.
B. M/s. NGHI Developers India Ltd.
(NGHI):
It came to the notice of SEBI that NGHI
and its promoters/ directors are engaged in
'fund mobiIizing aclivily' from ubIic, by
oaling/ sonsoring/ Iaunching CIS vilhoul
obtaining registration from SEBI. Vide an ad
interim ex-parte order dated July 09, 2012
(hereinafter referred to as the interim order),
SEBI directed NGHI and its promoters and
directors to immediately stop collecting
money, directly or indirectly, from investors
under lhe schemes/ Ians oered by il and
as idenlihed in lhe inlerim order or Iaunch
any further plans/ schemes in the nature of
a CIS. The order further directed the NGHI
to deposit the money collected from the
Table 3.25: Enqui ry and Adj udi cat i on
Proceedings Initiated against
other Intermediaries during 2012-
13
Adjudi- Warning/
Intcrmcdiarics catinn Enquiry dccicncy
advice
1 2 3 4
Registrar to an Issue &
Share Transfer Agents 0 0 4
Merchant Bankers 0 0 17
Depository Participants 0 0 29
Credit Rating Agencies 0 0 5
Debenture Trustees 1 0 4
Total 1 0 59
SEBI also instructed MPS not to launch any
new scheme or raise any money from the
investors, even under the existing schemes,
liII a cerlihcale of regislralion is granled by
the Board.
MPS failed to comply with certain
important conditions of the provisional
registration and also continued raising money
from the public. SEBI, therefore, directed
MPS, vide an ex-parte order dated May
11, 2012, to deposit an amount of ` 1,169
crore, raised by MPS through its Collective
Investment Schemes in an escrow account
vilh a nalionaIized bank. SII did nol receive
any reply from the company regarding the
said order, which was to be treated as a Show
Cause Notice by MPS.
Meanwhile, several litigations were
hIed by lhe comany's markeling agenls/
development executives seeking injunctions
against MPS and/or SEBI orders. MPS also
conlinued raising mobiIizing money from lhe
public. Therefore, vide order dated December
06, 2012, directed MPS to wind up its
scheme(s) idenlihed as CoIIeclive Inveslmenl
Schemes and refund the money collected by
it under the scheme(s) with returns which are
142
investors in a separate bank account within
a period of 3 days. Thereafter, on request of
the company, various hearings were granted
and it was concluded that the transactions
between NGHI and its customers are not real
estate transactions simpliciter; rather they
salisfy aII lhe ingredienls of a CIS as dehned
under Section 11AA of the SEBI Act, 1992.
Accordingly, an order dated November
06, 2012 was passed against the above
company for violation of SEBI (CIS)
Regulations, 1999. The company was directed
to wind up its scheme(s) identified as
Collective Investment Schemes in this order
and refund the money collected by it under
the scheme(s) with returns which are due
lo lhe inveslors as er lhe lerms of lhe oer
within a period of one month from the date of
this order, failing which the following actions
would follow:
a. SEBI woul d i ni ti ate prosecuti on
proceedings against NGHI under Section
b. The promoters/ directors/ managers/
scheme(s) of NGHI would be restrained
c. A reference would be made to the State
civil/ criminal case against NGHI and
oences of fraud, chealing, and criminaI
public funds.
d. A reference would be made to the
the process of winding up of NGHI.
C. M/s. Nicer Green Forests Ltd (NGFL)
The comany mobiIized funds from lhe
public and pooled it to purchase large tracts
of land at low cost to develop the same and
sell the land/produce to the investors at low
price. The investors were given estimated
reaIizabIe vaIue againsl lheir inveslmenls al
the end of the term and they are also given
an olion lo lake lhe Iand or a hxed aymenl
as per the terms of the scheme. Therefore, in
accordance with the scheme, the investors
made payment, and were entitled to receive
rohls, income, roduce or roerly from
such scheme or arrangement without having
any day to day control over the investments,
thus satisfying the requirements of Section
11AA of SEBI Act, 1992.
The company was found to be carrying
out CIS activities without obtaining SEBI
registration. Accordingly, vide order dated
November 09, 2010, SEBI directed the
company to wind up its existing collective
investment scheme(s) and refund the money
collected by it under the scheme(s) with
returns which are due to the investors as
er lhe lerms of oer vilhin a eriod of
one month from the date of the said order.
However, even after repeated reminders, the
company failed to submit the required WRR,
and hence its claim regarding completion of
repayments in compliance with order dated
November 9, 2010 could not be verified/
ascertained. In view of the same, SEBI issued
a Show Cause Notice (SCN) dated June 27,
2012 to NGFL and its promoters/ directors/
persons in charge of business of its scheme(s)
{hereinafter referred to as the noticees}
calling upon them to show cause as to why
appropriate actions in terms of SEBI Act,
1992 and SEBI (CIS) Regulations, 1999 should
not be taken against it and its promoters/
directors/ persons in charge of the business
of its scheme(s) for failing to comply with the
143
order dated November 9, 2010. The noticees
were thereafter granted various opportunities
for personal hearing but the noticees did not
avail any of them. Accordingly, vide order
dated March 12, 2013; the following directions
vere assed in lhis mauer:
a. The company and its 7 promoters/
directors are restrained and debarred
from accessing the securities market and
further prohibited from buying, selling
or dealing in securities market, directly
or indirectly, in any manner whatsoever
till the schemes of the NGFL is wound up
and aII monies mobiIized by il lhrough
its collective investment schemes are
refunded to the satisfaction of SEBI.
b. The company and the 7 promoters/
direclors are rohibiled from mobiIizing
funds under any schemes or arrangement,
existing or future, as defined under
section 11AA of SEBI Act, 1992.
D. M/s. Maitreya Services Pvt. Ltd. (MSPL)
On receil of reference from Oce of
The Income Tax alleging contravention of
the SEBI Act and Regulations against MSPL,
SEBI sought information from the company
regarding its activities. From the examination
of the information received, it appeared that
the company is carrying out the activities of
CIS and not those of real estate, as claimed
by the company. Accordingly, a Show Cause
Notice was issued to the company and its
directors on October 14, 2011 asking them to
show cause as to why suitable action should
not be initiated against them for violation
of regulation 3 of SEBI (CIS) Regulations,
1999 read with section 11AA of the SEBI
Act. Thereafter, on request of the company,
various hearings were also granted to the
company and its directors where they made
various submissions regarding their business.
On examination of the same, it was found
that the company is carrying out CIS activities
and hence, an order dated March 25, 2013
was passed against the company directing it
to wind up its existing collective investment
schemes and refund the money collected by
it under the schemes with returns which are
due lo lhe inveslors as er lhe lerms of oer
within a period of three months from the
date of this order and submit a winding up
and repayment report to SEBI in accordance
with the CIS regulations failing which the
following actions shall follow:
SII vouI d i ni li ale roseculi on
proceedings against MSPL under Section
The romolers/ direclors/ managers/
scheme(s) of MSPL would be restrained
A reference vouId be made lo lhe Slale
civil/ criminal case against MSPL and
oences of fraud, chealing, and criminaI
public funds.
A reference vouId be made lo lhe
the process of winding up of MSPL.
7. PROSECUTION
I. Trends in Prosecution
A. Number of Prosecutions Launched
During 2012-13, 75 prosecution cases
were launched against 150 persons/ entities as
compared to 29 prosecutions launched against
60 persons/entities in 2011-12. (Table 3.26)
144
Till 2012-13, region-wise, the highest
number of prosecutions were launched in
Head Oce/Weslern Region (709) foIIoved
by the Northern Region (346) (Table 3.27).
B. Higher Court Proceedings
During 2012-13, 21 applications/petitions
vere hIed in lhe Higher Courls viz., Sessions
Courts, High Courts and Supreme Court.
During the period 11 cases were disposed and
a total of 116 cases are pending.
C. Important Court Pronouncements in
Prnsccutinn Maucrs
a. SEBI vs. M/s. PPL Pink Harvest Ltd.
and others (C.C. no. 1318/2002)- Before
Honble Addl. Sessions Judge, Delhi
It has been held that SEBI has proved its
case beyond reasonable doubt and accordingly
held guilty M/s. PPL Pink Harvest Ltd. (A-1)
and Mr. Anurag Bisaria (A-4) for the violation
of Section 12 (1B) of SEBI Act and Regulation 5
and 73 of SEBI (CIS) Regulations, 1999. During
the trial proceedings Mr. M.L. Saxena (A-2)
and Smt. Asha Saxena (A-3) were abated on
account of their death.
The court sentenced the A-4 for a period
of six monlhs RI and burdened vilh a hne of
` 1,00,000 (Rupees one lakh only) in default
convict shall undergo SI for a period of two
monlhs for oence unishabIe under Seclion
24(1) of the SEBI Act, 1992. The A-1 was
burdened vilh a hne of ` 3,00,000 (Rupees
lhree Iakh onIy) for lhe oence unishabIe
under Section 24(1) of the SEBI Act, 1992. The
hne amounl vas aid on behaIf of convicl
A-2. Since, company was not represented by
any counseI lhe hne imosed uon comany
couId nol be reaIized.
b. SEBI vs. M/s. Pioneer Forests India Ltd.
and nthcrs (C.C. nn. 1200/03 & Ncw
C.C. 135/05)- Before Honble Addl.
Sessions Judge, Delhi
It was held that SEBI has proved
its case beyond reasonable doubt and
accordingly held guilty Mr. Balwinder Singh,
Table 3.26: Prosecutions Launched
No. of cases in No. of persons/
Ycar which prnsccutinn cntitics against
has bccn whnm prnsccutinn
launched has been launched
1 2 3
Up to and
including
1995-96 9 67
1996 - 1997 6 46
1997 - 1998 8 63
1998 - 1999 11 92
1999 - 2000 25 154
2000 - 2001 28 128
2001 - 2002 95 512
2002 - 2003 229 864
2003 - 2004 480 2,406
2004 - 2005 86 432
2005 - 2006 30 101
2006 - 2007 23 152
2007 - 2008 40 185
2008 - 2009 29 114
2009 - 2010 30 109
2010 - 2011 17 67
2011 - 2012 29 60
2012 - 2013 75 150
Total 1,250 5,702
Tab!c 3.27: Rcginn-wisc Data nn Prnsccutinn
Cases as on March 31, 2013
Number Exemption
Region of Percentage
Cases of Total
1 2 3
Head Oce /
Western Region 709 56.7
Northern Region 346 27.7
Southern Region 96 7.7
Eastern Region 99 7.9
Total 1,250 100.0
145
The Ld Court vide Judgment dated
06/06/2012 held that SEBI has proved its case
beyond reasonable doubt and accordingly
held Accused Nos. 1 Company, Sanjay Kr.
Sinha, Virendra Sinha, Atul Kishore Gupta,
Lalit Awasthi liable for the above said
violations. Convict company was burdened
vilh a hne of ` 4,00,000 (Rupees four lakh
only) and convict number two and three were
sentenced to rigourous imprisonment for a
eriod of four monlhs and aIso vilh a hne of
` 2, 00,000 (Rupees two lakh only) each.
d. 5EBI vs M/s. F!aw!css P!antatinns Ltd.
and Others- C. C. no. 1232/03- Before
Honble Addl. Sessions Judge, Delhi
The comIainl in lhe calioned mauer
was filed by SEBI on December 15, 2003
against Flawless Plantations Ltd (A-1) and its
directors before the Court of ACMM for the
violation of SEBI Act, 1992 read with SEBI
(CIS) Regulations, 1999 which is punishable
under Section 24(1) read with Section 27 of
the SEBI Act, 1992. They mobilised an amount
of ` 17,25,000 (Rupees seventeen lakh twenty
hve lhousand onIy) from lhe generaI ubIic.
Proceedings for Mr. Chandra Kishore
Asthana were abated on account of his death.
Further, Mr. Manoj Kumar and Mr. Samsher
Khan vere decIared IrocIaimed oender vide
Order dated 12/04/2007. The Ld Court, vide
Judgment dated 11/10/2012 held that SEBI
has proved its case beyond reasonable doubt
and accordingly held A-1 Company, Mr.
Sunil Kumar Asthana (A-2) and Mr. Pawan
Kumar Verma (A-3) liable for the above said
violations. Convict company was burdened
vilh a hne of ` 4, 00,000 (Rupees four lakh
only) and A-2 & A-3 were sentenced to
rigourous imprisonment for a period of four
monlhs and aIso imosed a hne of ` 2, 00,000
(Rupees two lakh only) each.
Mr. Kulwinder Singh, Mr. Gurudev Singh
Saini, Mr. Hardyal Singh, Shir Ajay Kumar
Sharma for the violation punishable under
Section 24(1) of SEBI Act, 1992.
During trial the company was deleted
from the array of the parties vide court order
dated September 13, 2007, Mr. Surinder Singh
and Mr. Manjit Singh and Mr. Jatinder Singh
were declared PO vide court order dated
Setptember 26, 2007.
The court sentenced the Mr. Balwinder
Singh and Mr. Kulwinder Singh rigorous
imprisonment for a period of one year and
a hne of ` 5,00,000 (Ruees hve Iakh onIy)
each in default further three months SI for the
oence unishabIe under Seclion 24(1) r/v
Section 27(1) & 27(2) of under Section 24(1)
of the SEBI Act, 1992 whereas Mr. Gurudev
Singh Saini, Mr. Hardyal Singh and Mr.
Ajay Kumar Sharma were burdened with a
hne of ` 2, 00,000 (Rupees two lakh only)
each in defauIl one monlh SI for lhe oence
punishable under Section 24(1) r/w Section
27(1) & 27(2) of lhe SII Acl, 1992. The hne
amount was paid by all the convicts in the
court.
c. SEBI vs. M/s. Nexus Farms Ltd. & Ors.-
C. C. nn. 1321/02, 41/2005 & Ncw CC
01/11- Before Honble Addl. Sessions
Judge, Delhi
The comIainl in lhe calioned mauer
was filed by SEBI on December 21, 2002
against M/s. Nexus Farms Ltd (A-1) and its
directors before the Court of ACMM for the
violation of SEBI Act, 1992 read with SEBI
(CIS) Regulations, 1999, which is punishable
under Section 24(1) read with Section 27 of
the SEBI Act, 1992. They mobilised an amount
of ` 29,00,000 (Rupees twenty nine lakh only)
from the general public.
146
agai nst erri ng CIS enti ti es, cri mi nal
prosecution cases have been launched by
SEBI against CIS entities. Since then, court
judgments have been obtained in a total of
171 CIS entities (Table 3.29).
Hovever, lhe Ld. Courl has acquiued
Mr. Ashutosh Kr. Asthana and Mr. Girish Kr.
Srivastava and observed that merely being the
promoter/share holders, it cannot be held that
they were in charge of and responsible to the
conduct of Convict No. 1 company.
II. Nature of Prosecution
Table 3.28 represents the nature of
prosecutions launched under various sections
of dierenl Acls. Iroseculions are Iaunched
by SEBI under the SEBI Act, 1992, Companies
Act, 1956, Depositories Act, 1996, SC(R) Act,
1956 and the Indian Penal Code. As on March
31, 2013, 1250 cases vere Iaunched.
Table 3.28: Nature of Prosecutions Launched
as on March 31, 2013
Nature of Prosecution Number
Launched of Cases
1 2
Securities and Exchange Board
of India Act, 1992 (SEBI Act) 1,053
SEBI Act & Securities Contracts
(Regulation) Act, 1956 (SCRA) 91
SEBI Act, SCRA & Companies Act 1
SEBI Act & Companies Act 3
SEBI Act & Indian Penal Code 5
Companies Act, 1956 70
Securities Contracts (Regulation)
Act, 1956 5
Depositories Act, 1996 14
Indian Penal Code 8
Total 1,250
8. LITIGATIONS, APPEALS AND
COURT PRONOUNCEMENTS
During 2012-13, 142 cases vere hIed in
dierenl courls and 86 cases vere disosed,
cumulative 642 such cases are pending, where
SEBI was a party (Table 3.30 and 3.30a).
During 2012-13, 225 aeaIs vere hIed
before Securities Appellate Tribunal (SAT),
whereas 62 appeals were dismissed and as
on March 31, 2013, 86 appeals are pending
(Table 3.31).
Against the orders of SAT, 12 appeals
vere hIed by SII, vhereas 38 aeaIs vere
filed against SEBI in the Supreme Court
during 2012-13 under section 15Z of the SEBI
Act (Table 3.32).
As on March 31, 2013, six appeals were
hIed by SII, vhereas nine aeaIs vere
pending against SEBI in the High Court
(Table 3.32a).
Table 3.29: Number of Prosecution Cases
decided by the Courts as on
March 31, 2013
Type of Decision Non-
by the Courts
CIS
CIS
Total
1 2 3 4
Convictions 138 10 148
Compounded (fully)* 7 52 59
Abated 0 4 4
Dismissed/Discharged 24 23 47
Withdrawn 2 2 4
Total 171 91 262
III. Disposal of Prosecution Cases
i) 262 cases were disposed by the Courts
till 2012-13, out of which, 148 cases resulted
in convictions and 59 cases were fully
compounded (Table 3.29).
ii) Disposal of Prosecution Cases in case of
Collective Investment Schemes (CIS)
Since the start of launch of prosecution
147
Tab!c 3.30: 5tatus nI Cnurt Cascs whcrc 5EBI
was a Party (5ub|cct Maucr)
Filed Disposed Pending as
Subject during during on March
2012-13 2012-13 31, 2013
1 2 3 4
Issue and Listing 23 15 57
Takeover 3 0 28
Secondary Market 9 2 61
Mutual Fund 2 6 22
Collective Investment
Schemes 24 25 107
Surveillance &
Investigations 14 3 43
Stock Broker
Registration Fee 1 1 61
Depository
Participants 1 0 7
Intermediaries 0 0 37
Cases relating to
Investor Complaints 18 8 78
Right to Information
(RTI) 5 4 18
General Services
Department 0 0 11
Miscellaneous 42 22 112
Total 142 86 642
Note: This table includes all the cases pending before any
judicial / quasi judicial forums pertaining to respective
su|jcci nabcrs cxc|u!ing inc siaiuicrq appca|s |cjcrc
SAT and Honble Supreme Court under SEBI Act/
SCRA/Depositories Act.
Table 3.30a: 5tatus nI Cnurt Cascs whcrc 5EBI
was a Party (Judicia! Fnrum)
Filed Disposed Pending as
Forum during during on March
2012-13 2012-13 31, 2013
1 2 3 4
Supreme Court 11 9 36
High Court 86 57 341
Civil Courts 7 1 67
Criminal Courts (other
than prosecution cases
hIed by SII) 2 1 4
Consumer Forums 12 12 117
Company Law Board 1 1 5
BIFR/ AAIFR 18 5 61
Labour Commissioner /
Labour Court 4 0 10
Green Tribunal 1 0 1
Total 142 86 642
Table 3.31: Status of Appeals before the
Securities Appellate Tribunal
Status of Appeals Number of Appeals
1 2
Appeals Pending as on
March 31, 2012 64
Appeals Filed during 2012-13 225
Appeals Dismissed 62
Appeals Remanded 10
Appeals Allowed 58
SEBI Order upheld with
Modihcalions 45
Appeal Withdrawn 28
Appeals Pending as on
March 31, 2013 86
Table 3.31a: Disposals of Appeals by Securities Appellate Tribunal
Appeals 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
No.of Appeals
Dismissed 1 2 7 20 15 16 29 46 139 40 81 86 134 90 62
No.of Appeals
Modihed 0 0 1 7 NA 10 58 101 16 27 1 19 45 51 45
No.of Appeals
Withdrawn 0 0 0 3 2 1 8 NA NA NA 17 19 29 16 28
No.of Appeals
Allowed 1 2 6 8 23 13 19 72 71 32 39 30 77 44 58
Total 2 4 14 38 40 40 114 219 226 99 138 154 285 191 193
148
9. CONSENT AND COMPOUNDING
During 2012-13, SEBI has received 193
applications for consent and compounding.
Further, 189 consent applications and
si x compoundi ng appl i cat i ons were
rejected during the year. In addition, 35
applications for consent and compounding
were withdrawn by the applicants. The
number of applications in rejection and
withdrawal categories may include the
aIicalions hIed during revious hnanciaI
years incIuding currenl hnanciaI year. In lhe
currenl hnanciaI year, 65 aIicalions vere
approved by SEBI under the consent and
comounding calegory for seuIing various
kinds of enforcement actions and collected
an amount of ` 14,73,44,244 (Rupees fourteen
crore seventy three lakh fourty four thousand
two hundred fourty four only)towards
seuIemenl/IegaI/adminislralive/disgorgemenl
charges. Month-wise details of applications
received and disposed under the consent and
compounding scheme during 2012-13 are
provided in Table 3.33.
185 applications were received during
2012-13 for consent, 64 applications were
disposed by passing orders whereas 189
applications were rejected. During the
year, SEBI collected ` 14,71,44,244 (Rupees
Fourteen crore seventy one lakh fourty four
thousand two hundred fourty four only)
as consenl charges for seuIemenl of cases
through consent mechanism (Table 3.34).
Further, eight applications were received
for compounding during 2012-13 and, one
application was partly compounded, for an
amount of ` 2,00,000 (Rupees two lakh only).
DelaiIs of aIicalions hIed for consenl and
compounding during 2012-13 are given in
Table 3.35.
10. INVESTOR ASSISTANCE AND
EDUCATION
I. Redressal of Investor Grievances
SEBI has been taking various regulatory
measures t o expedi t e t he redressal
of investor grievances. The grievances
lodged by investors are taken up with the
respective listed company or intermediary
and continuously monitored. Grievances
pertaining to stock brokers and depository
participants are taken up with concerned
stock exchange and depository for redressal
Table 3.32: Status of Appeals before the Hon'ble Supreme Courts
5ub|cct Casc pcnding Casc !cd Cascs Casc pcnding as nn
Maucr as nn 2011-12 during 2012-13 dismisscd/a!!nwcd March 31, 2013
1 2 3 4 5
AeaIs hIed by SII 65 12 5 72
AeaIs hIed againsl SII 59 38 8 89
Total 124 50 13 161
Table 3.32a: Status of Appeals before the Honble High Courts
Subject Case pending Cases dismissed / Case pending as on
Maucr as nn 2011-12 a!!nwcd March 31, 2013
1 2 3 4
AeaIs hIed by SII 6 0 6
AeaIs hIed againsl SII 11 2 9
Total 17 2 15
149
Table 3.33: Receipt and Disposal of applications under Consent and Compounding Process
Mnnth/ Nn. nI Nn. nI App!ica- 5cu!cmcnt / Lcga! / Admn Tnta!
Ycar App!icatinns tinns 5cu!cd by Cnmpnunding Chargcs Disgnrgcmcnt Amnunt
received passing orders Charges (`) (`) (`) (`)
1 2 3 4 5 6 7
2007-08 698 101 2,69,07,850 40,00,950 0 3,09,08,800
2008-09 692 440 37,29,30,786 54,90,000 8,27,84,906 46,12,05,692
2009-10 702 363 49,17,39,617 45,69,500 18,98,33,101 68,61,42,218
2010-11 359 177 70,44,96,771 4,76,500 1,71,20,811 72,20,94,082
2011-12 272 105 16,49,04,875 97,000 0 16,50,01,875
2012-13 193 65 12,44,71,413 3,00,000 2,25,72,831 14,73,44,244
Apr-12 15 7 37,00,000 0 0 37,00,000
May-12 11 6 17,10,000 0 0 17,10,000
Jun-12 14 0 0 0 0 0
Jul-12 30 1 7,00,000 0 0 7,00,000
Aug-12 29 0 0 0 0 0
Sep-12 21 5 23,50,000 0 0 23,50,000
Oct-12 11 13 3,59,00,000 0 0 3,59,00,000
Nov-12 10 12 2,04,52,282 0 1,92,31,831 3,96,84,113
Dec-12 8 8 50,74,625 3,00,000 0 53,74,625
Jan-13 27 10 43,90,000 0 33,41,000 77,31,000
Feb-13 12 2 8,92,500 0 0 8,92,500
Mar-13 5 1 4,93,02,006 0 0 4,93,02,006
Tab!c 3.34: Cnnscnt App!icatinns !cd with 5EBI during 2012-13
No. of Consent No. of application Consent Charges No. of Application
Application disposed of by (`) rejected
received passing order
1 2 3 4
185 64 147,144,244 189
Tab!c 3.35: Cnmpnunding App!icatinns !cd by thc accuscd in crimina! cnurts during 2012-13
No. of Compounding No. of applications compounded^ Compounding charges No. of Application
App!icatinns !cd Fu!!y Cnmpnundcd Part!y Cnmpnundcd rcccivcd by 5EBI rc|cctcd^
1 2 3 4 5
8 0 1 2,00,000 6
Amounl received lovards disgorgemenl, seuIemenl and IegaI exenses.
^ The number of aIicalions may incIude lhe disosaI of lhe aIicalion hIed during revious hnanciaI years.
and monitored by the concerned department
through periodic report obtained from
them. Grievances pertaining to other
intermediaries are taken up with them
directly for redressal and continuously
monitored by concerned department of SEBI.
150
The company/intermediary is required to
respond in prescribed format in the form of
Action Taken Report (ATR). Upon the receipt
of ATR, the status of grievances is updated. If
the response of the company/intermediary is
insucienl/ inadequale, foIIov u aclion is
initiated. SEBI takes appropriate enforcement
actions (Adj udication, 11B directions,
Prosecution etc) as provided under the law
where progress in redressal of investor
grievances is not satisfactory.
The following paragraphs highlight
SEBIs performance and measures taken in
the year 2012-13 for expediting the redressal
of investor grievances.
II. SEBI Complaints Redress System
SEBI has received 42,411 complaints
during lhe hnanciaI year 2012-13 and resoIved
54,852 grievances cumulatively as compared
to 46,548 grievances received and 53,841
grievances resolved in the year 2011-12
(Table 3.36).
As on March 31, 2013, there were 11,410
complaints pending resolution as compared
to 23,725 pending grievances cumulative
as on March 31, 2012. The net reduction in
pending complaints has been 12,315 in 2012-
13 as compared to 4,928 in 2011-12.
SCORES enables the investor to directly
lodge the complaints online and such
complaints are considered as e-complaints.
During 2012-13, a total of 26,195 e-complaints
were recei ved compared t o 10, 635
e-comIainls received in 2011-12, reecling
an increase of 146.3 percent over the previous
year. This indicates that the SCORES system
has been working satisfactorily and has
helped in making the complaint handling and
redress mechanism more ecienl.
III. Re gul a t or y a c t i on a ga i ns t
Companies and their Directors for
non-redressal of Investor Grievances
SEBI takes appropriate enforcement
actions (adjudication, directions, prosecution
etc) as provided under the law where
progress in redressal of investor grievances is
not satisfactory.
a. The 11B orders were passed during the
last three years, against the companies
and its directors debarring them from
accessing the securities market and from
buying, selling or dealing in securities
directly or indirectly, in whatsoever
manner, till all the investors grievances
against the company are resolved by
them. (Table 3.37)
During the year 2012-13, the following
four companies and its directors were
Table 3.36: Status of Investor Grievances Received and Redressed
Financial Year
Grievances Received Grievances Redressed Pending Actionable
Ycar-wisc Cumu!ativc Ycar-wisc Cumu!ativc Gricvanccs
1 2 3 4 5 6
2008-09 57,580 26,74,560 75,989 25,03,560 49,113
2009-10 32,335 27,06,895 42,742 25,46,302 37,880
2010-11 56,670 27,63,565 66,552 26,12,854 28,653
2011-12 46,548 28,10,113 53,841 26,66,695 23,725
2012-13 42,411 28,52,524 54,852 27,21,547 11,410
* excludes complaints against whom regulatory actions are initiated. Further, the above data does not include
comIainls received by SII in lhe mauer of Sahara OICDs.
151
restrained from accessing the securities
market till all the pending investor grievances
are resolved (Table 3.38).
SEBI has levied penalty against ten
companies through adjudication proceedings
during the year 2012-13, for their failure to
redress investor grievances. (Table 3.40)
Further regulatory actions have been
initiated against companies for their failure
to redress investor grievances. During 2012-
Table 3.37: Failure to Redress Investor
Grievances: Order passed under
section 11B
Number of companies
5. Ycar Numbcr nI whcrc nrdcr dispnscd
Nn. Cnmpanics n nn rcdrcssa!
of grievances
1 2 3 4
1 2010-11 18 1
2 2011-12 7 5
3 2012-13 4 2
Table 3.38: Companies Restrained From
Accessing the Securities Market
S. No. Name of the Company
1 2
1 Alpine Industries Ltd.
2 Shukla Data Technics Ltd.
3 Top Telemedia Limited
4 International Hometex Ltd.
Table 3.39: Failure to Redress Investor
Gri evances: Adj udi cat i on
Proceedings
S. Number of Penalty
No. Year companies amount (`)
1 2 3 4
1. 2010-11 3 42,00,000
2. 2011-12 5 61,30,000
3. 2012-13 10 40,35,000
b. SEBI has imposed penalty against
the companies through adjudication
proceedings during the year, for their
failure to redress investor grievances.
(Table 3.39)
Table 3.40: Companies Penalised for their
failure to Redress Investor
Grievances
S. Name of the Penalty
No. Company Amount (`)
1 2 3
1. Kanel Oil & Export Industries Ltd. 2,00,000
2. Roselabs Industries Ltd. 12,00,000
3. Satguru Agro Industries Ltd. 200000
4. Simco industries Ltd. 150000
5. Jord Engineers India Ltd. 200000
6. Ra| Irrigalion ies & huings Lld. 75000
7. Earnest Healthcare Ltd. 10,00,000
8. Gujarat Aqua Industries Ltd. 10000
9. Gujarat Filaments Ltd. 500000
10. Lohia Polyester Ltd. 500000
* M/s Sabero Organics Gujarat Ltd. resolved all
pending complaints and also paid ` 6,80,000 under
consent proceedings. (Order dated 29/11/2012).
13, Proceedings under section 11B of SEBI
Act, 1992 have been initiated against 146
companies and their directors for their failure
to redress investor grievances. Adjudication
proceedings under section 15C has been
approved against 459 companies for levying
monetary penalty for their failure to redress
investor grievances.
IV. Issuancc nI Nn-nb|cctinn Ccrticatc
Companies raising capital through
public issue of securities are required to
deposit one percent of the issue amount with
the designated Stock Exchange. This deposit
is released by the Stock Exchange only
afler SII issues a No Ob|eclion Cerlihcale
(NOC). SEBI issues NOC to companies after
satisfactory redressal of complaints received
by SEBI against the Companies.
During the year 2012-13, NOCs were
issued to 73 applicant companies. NOCs to 47
companies were not issued as the applications
were incomplete or due to unsatisfactory
redressal of investor grievances.
152
was initially available on all working days
from Monday to Friday from 9:30 a.m to 5:30
p.m (excluding declared holidays).
Wilh eecl from Selember 1, 2012, SII
has extended its toll free helpline service
(1800 22 7575 / 1800 266 7575) to Saturday
and Sunday also. The services on Saturday
and Sunday are available to investors from
9:30 a.m. to 5:30 p.m presently in English,
Hindi, Marathi and Gujarati only. The
number of calls received on Toll Free Helpline
during the Financial Year 2012-13 is given in
following chart below.
V. SEBI Toll Free Helpline
To facilitate replies to various queries
of lhe generaI ubIic on mauers reIaling lo
securities market, SEBI had launched toll free
helpline service number 1800 22 7575/1800 266
7575 on December 30, 2011.
The toll free helpline service is available
to investors from all over India and is in
14 Ianguages viz. IngIish, Hindi, Maralhi,
Gujarati, Tamil, Bengali, Malayalam, Telugu,
Urdu, Oriya, Punjabi, Kannada, Assamese
and Kashmiri. The toll free helpline service
153
Wilh eecl from Selember 2012, SII
Helpline introduced an option of receiving
a feedback from the callers and based on the
feedback received various measures have
been adopted for improvement of the helpline
services.
VI. Investor Assistance
SEBI provides assistance / guidance to
investors by replying to their queries received
through the following modes
I-maiI (asksebi@sebi.gov.in)
Inveslors visiling SII Head Oce
Leuers
SEBI replied 1,874 queries during April
1, 2012 to Mar 31, 2013. Assistance so
rendered to investors was augmented by
gathering details from the FAQs, Circulars
etc available on SEBI website, and from the
details gathered through e-mail, phone calls
from market intermediaries.
VII. Investor Education - Multimedia
Campaign
In December 2012, SEBI launched
a Multi-media Investor Education and
Awareness Campaign, with obj ective
of giving important messages, creating
general awareness among the investors and
prospective investors across the nation,
regarding various relevant topics of investor
avareness viz, caulion lhe inveslors in
respect of schemes which promises unrealistic
returns, grievance redressal mechanism,
awareness regardi ng the products /
oorlunilies (vilhoul romoling any secihc
roducl) avaiIabIe in lhe securilies markel viz,
Mutual Fund, investment through Primary
and Secondary Market etc.
Campaign is being carried at pan
India level in Hindi, English and 11 major
regional languages, with an idea of spreading
awareness among maximum people across
lhe nalion incIuding far ung areas of lhe
nation. As part of the above Campaign,
advertisements related to topic Investor
Grievance Redressal Mechanism at SEBI
intending to create awareness regarding
SEBIs SCORES and Toll Free helpline, have
been broadcast in mass media (TV, Radio
and Print) during December 2012 to February
2013.
Education and awareness along with the
grievance redressal had been the thrust areas
as a part of capacity building and to make
inveslors conhdenl and avare vhiIe invesling
in securities market.
VIII. Invcstnr Awarcncss Prngrams/
Workshops
Various investor awareness programs
have been conducted by SEBI with the help
of Exchanges, Depositories and various trade
bodies like AMFI etc. SEBI also reimburses
the cost of the approved programs conducted
by Investor Associations recognised by SEBI,
subject to certain limits. The topic for all
such rograms vas common viz. Inveslor
Grievance Redressal Mechanism in Securities
Market.
Tab!c 3.41: Trcnds in Awarcncss Prngrams/
Workshops Conducted by SEBI
Financial 2007- 2008- 2009- 2010- 2011- 2012-
Year 08 09 10 11 12 13
1 2 3 4 5 6 7
Number
of
programs 15 26 40 149 175 216
A. Regional Seminars
This initiative started in 2011-12 has been
extended to reach out to more people and
concentrating primarily on Tier II and Tier
III cities. As on March 31, 2013, 44 regional
seminars have been conducted in places like
154
Sultanpur, Rourkela, Sambalpur, Rangpo,
Gangtok, Satara, Dehradun, Rajkot, Varanasi,
Akola, Guwahati, Durg, Rajnandgaon,
Bilaspur, Corba, Thiruvananthapuram,
Hyderabad, Port Blair, Jamnagar, Porbandar,
Pune, Nagpur, Kolhapur, Tiruchirapalli,
Aurangabad, Indore, Ranchi, Bhopal, Raipur,
Ujjain, Jabalpur, Bhubaneswar, Gwalior,
Thrissur, Patna, Meerut, Agra, Lucknow,
Chennai, Jaipur, Amritsar, Jamshedpur,
Aligarh, Bareilly, Silchar, Durgapur, Kanpur,
Mysore, Mangalore, Chandigarh, Jodhpur,
Kharagpur, Shillong, Salem, Agartala,
Vishakhapatnam. (Table 3.42)
awareness across various topics in securities
market. An in-house video on How to lodge
a complaint in SCORES has been developed
and few more are in the pipeline.
D. Financial Education
With the aim of spreading financial
literacy, SEBI has taken up various programs
across the country. The resource person
model developed by SEBI has been well
appreciated internationally as well as by other
regulators and various ministries.
E. School Programs
SII inilialed hnanciaI Lileracy rogram
named Pocket Money for school students
jointly with National Institute of Securities
Market (NISM) in 2008-09 and positioned
it as an important life skill at the school
level targeting mainly 8th and 9th standard
students.
Under the Pocket Money programme,
financial literacy was imparted to school
students. It includes orientation programmes
for the School Principals, training programmes
for teachers followed by the teachers conducting
cIasses lo imarl hnanciaI educalion conlenls
covered in the pocket money programme to
the students. At the end of the programme,
examination is conducted for the students and
cerlihcales avarded lo lhem.
During the year 2012-13, twenty-five
programs being conducted, benefiting a
total of 1,180 Teachers were conducted.
The programme could reach to 150 schools
covering 5,072 students during the year.
Programme was also conducted in schools in
Kerala, Karnataka, Mumbai and Tamil Nadu.
(TabIe 3.43)
F. Through SEBI trained Resource Persons
SEBI launched a financial education
drive through Resource Persons (RPs) in
Table 3.42: Regional Seminars Conducted
by SEBI during 2012-13
Financial Year 2011-12 2012-13 Total
1 2 3 4
Number of
Seminars 47 44 91
B. Dedicated Investor Website
S EBI ma i nt a i ns a n upda t e d,
comprehensive website for education of
investors (www.investor.sebi.gov.in). The
website has been revamped to make it more
user friendly and the educative material
is being updated. The schedule of various
programmes is also updated on the website.
SEBI Investor website have been rated four
oul of hve in a research conducled by IOSCO
to evaluate regulator websites on investor
educalion. Iorls aIso have been made lo
popularise Rajiv Gandhi Equity Savings
Scheme (RGESS) through the website. A
dedicated link for the RGESS has been
provided in the SEBI investor website.
C. Educative Material for Investor
Educatinn And Awarcncss
SEBI is in the process of updating various
materials relating to investor education and
155
June 2010, where teachers and lecturers
were trained and empanelled for conducting
hnanciaI educalion vorkshos. Subsequenl lo
deliberations at various levels, the eligibility
criteria for being empanelled as Resource
Persons has been broadened. The revised
eligibility criterion presently is as follows:
a. Qua!icatinn:
Iosl graduales in lhe heId of commerce,
economics, management, law, science and
graduates in engineering & medicine
b. Employment:
Ixisling/Relired leachers in Sld X, XI,
XII, Graduates and Post Graduate course
of college.
Ixisling/Relired emIoyees of cenlraI/
state government, various regulators,
PSUs and ex-defence persons.
c. Experience
Working experience of at least three
years.
Apart from the above eligibility criteria,
the empanelled RP is also required to abide
by the terms and conditions and code of
conduct. The workshops conducted through
the Resource Persons are usually for 2 to 3
hrs duration where the SEBI study material
is distributed free of cost to the participants.
The study material developed for the
above target groups is presently available
in 10 vernacular languages covering various
topics.
During lhe hnanciaI year 2012-13, lvo
rounds of empanelment and training were
conducted taking the number of RPs on panel
from 297 in 2011-12 to 911 as on March 31,
2013, from around 313 districts covering 26
states and four union territories. Through
lhese Resource Iersons, around 5,934 hnanciaI
education workshops in around 335 districts
covering 25 states and 4 union territories have
been conducted during the financial year
2012-13. (Table 3.44)
Table 3.43: School Programs Conducted by SEBI during 2012-13
No. of No. of No. of No. of training the
Year Schools Teachers Students trainer Programs
Covered trained Covered Conducted
1 2 3 4 5
2008-09 151 230 0 8
2009-10 10 161 3,876 5
2010-11 31 110 4,311 2
2011-12 360 631 50,946 14
2012-13 150 1,180 5,072 25
Total 702 2,312 64,205 54
Table 3.44: Trends in Financial Education
Programs through Resource
Persons (RPs)
Financial Year 2010-11 2011-12 2012-13 Total
1 2 3 4 5
Total 176 3,089 5,934 9,199
G. Through SEBI Officers as Resource
Persons
As a part of SEBIs financial literacy
initiative and to further expand our activities,
it was decided that SEBI officers may be
allowed to conduct financial education
programs and investor education campaigns
across lhe counlry. Around 115 SII ocers
156
voluntarily empanelled themselves as RPs
and have conducted 71 programs across the
counlry during lhis hnanciaI year.
IX. Visit to SEBI
SEBI invites students from schools,
colleges and professional institutes who are
interested to learn about SEBI and its role as
a regulator of securities markets. The program
was started in February 2011 and has been
quite popular. Till date SEBI had conducted
80 such visits; and participants visiting from
different parts of the country (Amritsar,
Pondicherry, Goa, Bareilly, Thrissur etc.) and
of dierenl courses (Comany Secrelaries,
Management, Commerce, Banking, Law, Arts,
science etc.). Educational institutions from
nine dierenl Slales and 1 Union Terrilories
and 20 dierenl dislricls have visiled SII
under this program.
11. RESEARCH ACTIVITIES
Section 11(2) (l) of the SEBI Act enshrines
SEBI to undertake research activities for
effectively fulfilling its functions. The
Department of Economic and Policy Analysis
(DEPA) assumes its role primarily from
Section 11 (2) (l) and Section 18 of SEBI Act,
1992 and actively embarked many studies
along with making mandatory reports as per
the Act.
DEPA is responsible to maintain
a repository of data for entire capital/
securities market, collection of data from
various sources, verifying their accuracy
and continuously maintaining/ updating the
data. During 2012-13, SEBI has published
SEBI Annual Report 2011-12, Handbook
of Statistics on Indian Securities Market
2012 and SEBI monthly Bulletin which are
available in the publication section of SEBI
website (www.sebi.gov.in). SEBI has been
distributing these publications to various
stakeholders in the market like research
institutions, investor associations, mutual
funds, banks, etc on gratis. Apart from
the publication, SEBI was responsible for
providing weekly-monthly report on Indian
Securities Markets and Monthly Report on
III ovs in Imerging markels lo Minislry
of Finance (MoF). SEBI is contributing
the capital market segment on Red Book
Payment System in India (published by
Bank of International settlement (BIS)),
Economic Survey for India and Government
of Maharashtra.
157
I. Research Inputs
SEBI has launched the SEBI DRG Study
project by inviting research proposals through
SII vebsile. A DRG SeIeclion Commiuee
was constituted for short listing proposals
received from the applicants. The Selection
Commiuee has shorlIisled lhe foIIoving lhree
proposals and the studies are in progress:
a. Impact of Increased Derivatives Trading
in India on the Price-Discovery Process,
b. Penetration of Mutual Fund Industry in
India; and
c. Foreign Investment in the Indian
Government Bond Market.
SEBI has also initiated research activities
related to primary market, secondary market
and institutional participations in the Indian
capital markets for the market development.
Further, SEBI is trying to identify the data
ga( inconsislencies and heIed reclihcalion
of data disseminated to help the market
participations. SEBI has also conducted
study on cross-country experience in risk
management framework in equity cash and
derivatives segment like Cross Border
Transaction of Capital among SAARC
counlries' submiued lo SAARC Secrelarial,
Kathmandu.
II. Market Interactions
SEBI invites renowned scholars and
financial market practitioners, to deliver
lecture/talk on the topics related to securities
markets, economics and finance. During
2012-13, SEBI invited experts to speak on
the topics such as : Foreign Trade and
Long-lerm CailaI Inovs in India: Issues
and Challenges, Post Crises Reforms:
Financial Regulation Issues, Dodd Frank
Acl and VoIcker RuIe, IorlfoIio ovs and
Indian equity markets, Business cycles
and rohl varnings, Derivalives for ASH
(Arbitrage, Speculation, and Hedging),
Market Liquidity: Asset Pricing, Risk, and
Crises, Ad|udicalion and LegaI mauers
and How should we present India story to
Investors (Domestic as well as Foreigner).
SII has organized a rain Slorming
Programme to get futuristic inputs on
158
various issues important for development
and regulation of securities market such as
raising of capital, corporate bond market,
mutual funds, etc. The programme was
held in Mumbai on February 11, 2013. The
program involved interaction with the
experts, academicians, market participants,
industrialists etc.
III. Risk Management
SEBI has set up Systemic Stability
Unit (SSU) to assess systemic risks, if any,
emanaling from securilies markel and oer
coordinated assistance/inputs from SEBI
to FSDC in monitoring Systemic Risks in
respect of Securities Market and monitoring
of Systematically Important Financial
Institutions (SIFI) under the jurisdiction of
SEBI. SSU is also coordinating with RBI and
concerned Departments in SEBI in respect
of circulation of agenda notes, minutes,
inuls for lhe ISDC subcommiuee meelings
and providing inputs and write up from
the securities market related perspective for
Financial Stability Report (FSR) published by
RBI.
159
Part Four: Regulatory Changes
PART FOUR: REGULATORY CHANGES
The SEBI Board has taken various
regulatory measures to protect the interests
of investors in securities market, for the
development of the securities market and
to regulate the securities markets. Various
amendments to the existing regulations were
nolihed. The summary of reguIalory changes
made is as follows:
1. REGULATORY DEVELOPMENTS
I. New Regulations
A. SEBI (Alternative Investment Funds)
Regulations, 2012 w.e.f. May 21, 2012
The Securities and Exchange Board
of India (Alternative Investment Funds)
Regulations (AIF Regulations) repealed the
SEBI (Venture Capital Funds) Regulations,
1996 ( VCF Regul at i ons) . The AIF
Regulations were introduced with a view
lo increase markel eciency by moniloring
unregulated funds, encouraging formation of
new capital and consumer protection. The AIF
Regulations are the outcome of the Concept
Paper, issued in August 2011, which was
drafted with a view to shift SEBIs regulatory
strategy from the existing facilitative regime
to a mandatory regime.
A significant requirement of the AIF
ReguIalions is lhal AIIs are barred from
raising capital from investors unless they
oblain regislralion vilh SII. The foIIoving
lyes of rivale ooIs of cailaI have been
broughl vilhin SII's mandalory regislralion
regime: (i) Venture Capital Funds; (ii) Private
Inveslmenl in IubIic Iquily Iunds, (iii)
Irivale Iquily Iunds, (iv) Debl Iunds, (v)
Infrastructure Equity Funds; (vi) Real Estate
Funds; (vii) Small and Medium Enterprises
Funds; (viii) Social Venture Funds; (ix)
Strategy Funds; and (x) Residual category
(including hedge funds).
The AII ReguIalions are aIicabIe lo
any fund eslabIished or incororaled in India
in the form of a trust or a company or a LLP
or a body cororale, vhich coIIecls funds
from investors, whether Indian or foreigner
for invesling in accordance vilh a dehned
investment policy. Mutual funds under the
SEBI (Mutual Funds) Regulation, 1996 and
collective investment schemes under SEBI
(Collective Investment Schemes) Regulations,
1999, family trust, ESOP trusts, employee
welfare trusts, holding companies, etc. are
expressly excluded.
Ixisling VCIs viII conlinue lo be
reguIaled by lhe VCI ReguIalions liII lhe
exisling fund or scheme managed by lhe fund
is vound u. Such funds are nol ermiued lo
launch any new scheme or raise any capital
commilmenls beyond lhe originaI largeled
corpus unless they seek registration.
Before raising any funds, AIFs are
required to state their investment strategy,
inveslmenl urose and business modeI in
an informalion memorandum vhich is lo be
hIed vilh SII al Ieasl 30 days rior lo lhe
launch of the scheme giving material detail
aboul lhe AII. The rocedure of hIing an
informalion memorandum before raising
funds is somevhal simiIar lo lhal rescribed
for comanies coming oul vilh ubIic oers.
ased on lhe ob|eclives soughl lo be
achieved, lhe AIIs have been cIassihed inlo
the following three categories:
a. Category I include those AIFs for which
certain incentives or concessions might
be considered by SII or Governmenl
of India or other regulators in India and
which shall include Venture Capital
Funds, SME Funds, Social Venture
Funds, and Infrastructure Funds.
160
b. Calegory II incIudes lhose vhich
do not fall in Category I and III and
which do not undertake leverage or
borroving olher lhan lo meel day-lo-day
operational requirements and cannot
engage in derivatives investments.
c. Category III has those AIFs including
hedge funds which trade with a view
to make short term returns and may
employ leverage including through
i nvestment i n l i sted or unl i sted
derivatives.
The key condilions rescribed under lhe
AIF Regulations include:
a. The AIF shall not accept from an investor
an investment of value less than one
crore.
b. AII shaII have a minimum corus of 20
crore.
c. The manager or sponsor for a Category
I and II AIF shall have a continuing
interest in the AIF of not less than 2.5
percent of the initial corpus or five
crore whichever is lower. For Category
III Alternative Investment Fund, the
conlinuing inleresl shaII be nol Iess lhan
hve ercenl of lhe corus or 10 crore,
whichever is lower.
d. Schemes may be Iaunched under an
AII sub|ecl lo fiIing of informalion
memorandum with SEBI along with
aIicabIe fees.
e. Calegory I and II AIIs shaII be cIose-
ended and shall have a minimum tenure
of 3 years. Hovever, Calegory III AII
may eilher be cIose-ended or oen-
ended.
f. No scheme of the AIF shall have more
than one thousand investors.
B. Securities Contracts (Regulation) (Stock
Exchanges and Clearing Corporations)
Regulations, 2012 w.e.f. June 20, 2012
The Securities Contracts (Regulation)
(Stock Exchanges and Clearing Corporations)
Regulations, 2012 (SECC Regulations) were
framed to provide for the ownership and
governance norms for stock exchanges and
clearing corporations.
Previously, ownership aspects of stock
exchanges vere deaIl vilh by lhe SCR (R)
(Manner of Increasing and Maintaining
IubIic SharehoIding in Recognised Slock
Exchanges) Regulations, 2006 (MIMPS
ReguIalion). Hovever, lhese reguIalions onIy
applied to those stock exchanges that were
corporatized and demutualised in terms of
schemes prepared in pursuance of the power
under section 4B of the Securities Contracts
(Regulation) Act, 1956 (SCRA). The SECC
Regulations were framed to provide a
framevork of reguIalion for bolh slock
exchanges and clearing corporations, repealed
lhe MIMIS ReguIalions bul incororaled
the aspects of MIMPS Regulations dealing
with shareholding restriction and fit and
proper criteria. Since Securities Contracts
(Regulation) Rules, 1957 (SCRR) already
provided for the aspects of recognition, the
SECC Regulations cross refer to the SCRR
with regard to these aspects.
The signihcanl asecls deaIl vilh by lhe
SECC Regulations are as follows:
a. Mandatory recognition of clearing
corporations: The SECC Regulations
makes it mandatory for those entities
vhich cIear and seuIe lrades lo aIy for
recognition as clearing corporations.
b. Corporatized and Demutualised
entity: Stock exchanges and clearing
cororalions are mandaled lo be
161
corporate entities. Trading and clearing
members are nol ermiued lo be arl
of lhe board of lhe exchanges and
clearing corporations. Further, the SECC
Regulations provide for a minimum 51
ercenl ubIic (non-lrading member)
sharehoIding. The ob|eclive is lo ensure
lhal comIiance asecls and ubIic
inleresl vouId nol be comromised by
lhe inleresl of lrading members.
c. Adequate dispersal of shareholding:
No single entity or person can acquire
or hoId more lhan hve ercenl (hfleen
percent in the case of institutions like
banking and insurance comanies,
ubIic hnanciaI inslilulions elc.) of lhe
paid up equity capital of a recognised
stock exchange or clearing corporation.
d. Fit and proper criteria: All shareholders,
directors and key management personnel
musl be ersons vilh hnanciaI inlegrily,
good reputation etc.
e. Net worth: Taking into account the
central role that stock exchanges and
clearing corporations play in the
securities market and the risk that these
institutions need to manage, net worth
requiremenls have been mandaled
for bolh slock exchanges and cIearing
cororalions. AIso, a cIear limelabIe
within which these requirements need
lo be comIied vilh has aIso been
provided.
f. Manner, conditions and terms of
appointment of directors: Taking into
account the need to ensure healthy
management of stock exchanges
and clearing corporations, the SECC
Regulations provide for the manner
of appointment of directors and also
olher condilions lo be comIied vilh,
such as code of conduct, regulation of
compensation policy, etc.
g. Corporate Governance: The SECC
Regulations provide for methods to
promote good corporate governance.
Ior examIe, oversighl commiuees lo
deaI vilh issues of conicl of inleresl
are mandated. Also, provisions for
aoinlmenl of comIiance ocer are
mandated. Further, clearing corporations
and stock exchanges are mandated to
ensure equal, unrestricted, transparent
and fair access to all persons without
any bias lovards associales and reIaled
entities.
h. Listing of securities: Recognised stock
exchange is ermiued lo aIy for Iisling
of its securities on any recognised stock
exchange other than itself.
C. SEBI ( I nve s t me nt Adv i s e r s )
Regulations, 2013 w.e.f. January 21, 2013
The SEBI (Invest ment Advi sers)
ReguIalions, 2013 (IA ReguIalions)
were framed to provide a framework for
registration and regulation of investment
advisers. Only the act of giving advice is
regulated under the IA Regulations, whereas
the regulation of selling of products, if
any, vouId be soIeIy under lhe urviev of
the product regulators like IRDA, RBI and
PFRDA.
The IA ReguIalions have been formed
lo regisler and reguIale individuaIs, body
corporate (including LLPs) and partnership
hrms, vho, for consideralion, are engaged in
lhe business of roviding inveslmenl advice
to investors or other persons or group of
persons and includes, any person who holds
himseIf as an inveslmenl adviser, by vhalever
name called. The salient features of the IA
Regulations are as follows:
162
a. Exemption from registrations
The foIIoving ersons have been
exempted from registration:
i. Person giving general comments
relating to securities market in good
faith;
ii. Insurance agenl/ brokers, ension
advisers advising solely in insurance
products/ pension products and
regi st ered wi t h I RDA/ PFRDA
respectively;
iii. Mul uaI f und di sl ri bul or, vho
is a member of a seIf reguIalory
organisalion recognized by SII or is
registered with an association of asset
management companies of mutual
funds, providing any investment advice
to its clients incidental to its primary
activity;
iv. Advocates, solicitors, law firms,
Members of ICAI, ICSI, ICWAI,
Actuarial Society of India providing
investment advice to their clients
incidental to their professional service;
v. SII - regi sl ered Sl ock rokers,
sub-brokers, IorlfoIio Managers,
Merchanl ankers (Hovever, such
intermediaries shall comply with the
generaI obIigalion and resonsibiIilies
provisions of the Regulations)
vi. Any person who provides investment
advice excIusiveIy lo cIienls based oul
of India. Hovever, ersons roviding
inveslmenl advice lo Non-Residenl
Indian or Person of Indian Origin
will fall within the purview of the IA
Regulations;
vii. Any representative and partner of an
investment adviser which is registered
under the IA Regulations: and
viii. Any olher ersons or enlilies as may be
secihed by lhe oard.
b. Banks/Body corporates
The banks/ body cororales vhich aIso
oer dislribulion or execulion services viII
be required lo offer inveslmenl advisory
services lhrough a subsidiary or a SearaleIy
IdenlihabIe Dearlmenl or Division (SIDD).
Such a SIDD viII be required lo be cIearIy
segregated from other activities. Moreover,
il viII be required lo make discIosures lo lhe
cIienls being advised aboul any remuneralion
or comensalion received by il and any of
ils associales for lhe dislribulion, referraI or
execution services.
c. Compensation
The inveslmenl adviser shaII nol oblain
any remuneration or compensation from
any erson olher lhan from lhe cIienl being
advised, in respect of the underlying products
or securities for which advice is provided.
d. Name
The inveslmenl advisers, nol being an
individual, registered under the regulations
is required to use the words investment
adviser in their name.
e. General responsibility
The IA Regulations provide for code of
conducl, hduciary dulies, record keeing, risk
rohIing of lhe cIienls and aIso deaI vilh lhe
issue of suilabiIily and arorialeness of lhe
advice.
f. Obligations of investment advisers
The obIigalions of inveslmenl advisers
include:
i. An investment adviser is required to
acl in a hduciary caacily and in lhe
interest of its clients.
163
ii. An investment adviser shall not divulge
any conhdenliaI informalion aboul ils
client without prior permission, except
vhere lhe discIosure is required lo be
made in compliance with any law.
iii. An investment adviser is required to act
abide by Code of Conducl as secihed
in the IA Regulations.
iv. An investment adviser is required
to conduct risk profiling and risk
assessment of the investor.
v. An investment adviser is required to
ensure lhal inveslmenls are suilabIe
and aroriale lo lhe risk rohIe of
the client.
vi. An investment adviser is required to
mainlain vriuen records for a eriod
of 5 years.
vii. An investment adviser is required
to conduct yearly audit in respect of
compliance with the IA Regulations.
An investment adviser is required to
maintain proper system and procedure for
redressing grievances of clients.
II. Amendments to Existing Rules/
Regulations
A. SEBI (Issue of Capital & Disclosure
Requirements) (Third Amendment)
Regulations, 2012 w.e.f. August 24, 2012
The SEBI (Issue of Capital & Disclosure
Requi r ement s) ( Thi r d Amendment )
Regulations, 2012 implement the following
ob|eclives:
1. To align the ICDR Regulations with
RuIe 19(2)(b) of Securilies Conlracls
(Regulation) Rules, 1957; and
2. To reIax lhe requiremenl of cooIing o
eriod of 12 veeks before and afler
Oer for SaIe (OIS) and InslilulionaI
Placement Programme (IPP). A promoter
or romoler grou has nov been
aIIoved lo offer eIigibIe securilies
through IPP or OFS through the stock
exchange mechanism secihed by SII,
sub|ecl lo lhe condilion lhal lhere
viII be a ga of minimum lvo veeks
belveen lvo successive oer(s) and/or
programme(s).
B. SEBI (Depositories and Participants)
(Amendment) Regulations 2012 w.e.f.
September 11, 2012.
In line with the recommendation of
imaI }aIan commiuee, lhe SII (Deosilories
and Participants) Regulations, 1996 were
amended to incorporate, inter alia, the
norms on shareholding and governance
of depositories. The key features of the
amendment are as follows:
1. A fil and roer crilerion has been
made aIicabIe lo lhe sharehoIders of
depository.
2. A person whose shareholding exceeds
two percent of the paid up equity share
capital of a depository is required to seek
arovaI from SII vilhin hfleen days
of the acquisition.
3. A recognised slock exchange lhal is
a sponsor of any depository is not
allowed to hold more than 24 percent
of the paid up equity share capital
of that depository. Mandate on the
sponsor stock exchange to reduce the
shareholding to 24 percent within a
eriod of 3 years.
4. Condilions have been secihed on lhe
comosilion of lhe governing board and
appointment of directors.
5. Code of conducl has been secified
for directors and key management
personnel.
164
6. Depositories are now required to have
an adequate Business Continuity Plan for
data and electronic records to prevent,
prepare for, and recover from any
disaster.
7. A depository is required to ensure equal,
fair and transparent access to all persons
vilhoul bias lovards ils associales and
related entities.
8. Ier mi ssi on has been gi ven l o
depositories to list its securities on a
recognised slock exchange, sub|ecl lo
condilions secihed in lhe reguIalions.
C. Securities and Exchange Board of India
(Mutual Funds) (Second Amendment)
Regulations, 2012 w.e.f. September 26,
2012
The SEBI (Mutual Funds) (Second
Amendmenl) ReguIalions, 2012 bring oul lhe
following regulatory changes:
1. Asset Management Companies (AMCs)
are required to disclose half yearly
hnanciaI resuIls of muluaI funds on lheir
vebsiles and an adverlisemenl in lhis
regard musl be ubIished in al Ieasl one
national English daily newspaper and
one regional newspaper.
2. IungibiIily of lolaI exense ralio
allowed.
3. To rovide AMCs exibiIily lo delermine
quantum of investment and advisory
fees sub|ecl lo overaII cas on exenses
and provided the same are fully
discIosed in lhe oer documenl.
4. In the case of fund of funds schemes,
AMCs have been rovided lhe exibiIily
to determine the individual proportions
of fees and exenses lhal may be
charged, including the weighted average
of charges Ievied by underIying schemes,
sub|ecl lo an overaII ca.
5. Brokerage and t ransact i on cost
chargeabIe lo lhe scheme for execulion
of trade are capped to the extent of 12
bs in case of cash markel lransaclions
and 5 bs in case of I&O lransaclions.
6. To improve the geographical reach of
muluaI funds and, bring in Iong lerm
money from smaller towns, AMCs
are allowed to charge additional Total
Ixense Ralio (TIR) (ulo 30bs)
depending upon the extent of new
inovs from Iocalions beyond lo 15
cilies. AMCs viII be abIe lo charge
30 bs if lhe nev inovs from lhese
cilies/ lovns are minimum 30 ercenl
of lhe lolaI nev inovs in lhe scheme,
or 15 percent of the average assets
under management (year to date) of the
scheme, whichever is higher. In case of
Iesser inovs lhe roorlionale amounl
viII be aIIoved as addilionaI TIR.
7. In order to encourage long term holding
and to reduce churn and align the
inleresls of lhe AMCs/ dislribulors vilh
that of the investors:
(i) lhe enlire exil Ioads vouId be
credited to the scheme while the
AMCs viII be abIe lo charge an
addilionaI TIR lo exlenl of 20 bs,
and
(ii) CIav back of addilionaI TIR (in lhe
case of inovs from cilies beyond
top 15 cities) is provided to the
extent the investments are redeemed
within a period of one year.
D. Securities and Exchange Board of
India (Issue of Capital and Disclosure
Requirements) (Fourth Amendment)
Regulations, 2012 w.e.f. October 12, 2012
Wilh a viev lo revilaIize lhe markels,
165
lhese amendmenl reguIalions bring oul lhe
following regulatory changes:
a. For enhancing the participation of retail
investors, share allotment system has
been modihed lo ensure lhal every relaiI
applicant, irrespective of his application
size, gels aIIolled a minimum bid
Iol, sub|ecl lo avaiIabiIily of shares in
aggregate. The system will satisfy more
number of smaIIer aIicanls in lhe
oversubscribed issues. The minimum
aIicalion size for aII inveslors has been
increased to ` 10,000-` 15,000, as against
the existing ` 5,000-` 7,000.
b. In order lo achieve fasler comIelion
and simplification of fund raising
rocess, Iover lhe cosl of fund-raising,
encourage rofessionaI/ hrsl generalion
entrepreneurs, rationalize disclosures in
furlher cailaI oering documenls lhe
amendmenls rovides for foIIoving :-
i. Requiremenl of average free oal
market capitalization reduced from
` 5,000 crore to ` 3,000 crore lo
faciIilale furlher ubIic offerings
(FPOs) and rights issues through
fasl-lrack roule.
ii. To encourage professionals and
lechnicaIIy quaIihed enlrereneurs
vho are unabIe lo meel lhe
requisile 20 ercenl conlribulion
by lhemseIves as romolers viII
be aIIoved lo meel lhe same vilh
lhe conlribulion of SII regislered
Alternative Investment Funds
such as SME Funds, Infrastructure
Iunds, II funds, VCIs, elc., sub|ecl
to a cap of 10 percent.
iii. To aIIov more fIexibiIily lo lhe
issuers, changes upto 20 percent
in lhe amounl roosed lo be
raised as given in lhe ob|ecls of lhe
issue al lhe RHI slage, as againsl
the existing 10 percent, will not
necessilale re-hIing vilh SII.
iv. To facilitate QIPs even in a falling
markel, issuers viII be aIIoved
lo oer a maximum discounl of 5
percent to the price calculated as
per the SEBI Regulations.
v. To provide updated information
to investors, listed companies have
been mandaled lo udale lheir
disclosures in the prospectus on
an annuaI basis and lo ensure lhal
lhe same is avaiIabIe in ubIic
domain. Such consoIidaled ubIic
discIosures can be used for lhe
purpose of FPOs / Rights Issue
hIings lhrough aroriale hyer-
links without requiring a repetition
of such disclosures.
c. To imrove lhe quaIily of ubIic
of f eri ngs and enhance i nvest or
roleclion, lhe eIigibiIily crileria for lhe
issuers coming lhrough lhe rohlabiIily
roule has been redesigned. Nov, onIy
issuers vilh a minimum average re-
lax oeraling rohl of Rs. 15 crore viII
be abIe lo come lhrough lhis roule.
Hovever, olher issuers viII conlinue
to access the capital market through
either the SME platform or compulsory
book buiIding roule vilh increased QI
participation of 75 percent, as against the
existing 50 percent.
d. To avoid any misleading signals to retail
inveslors aboul lhe exlenl of subscrilion
in the issue, no withdrawal or lowering
lhe size of bids shaII be ermilled
for non-relaiI inveslors al any slage.
Hovever, lhe relaiI individuaI inveslors
166
may eilher vilhdrav or revise lheir bids
unliI hnaIizalion of aIIolmenl.
e. The rice band aIong vilh reIevanl
hnanciaI informalion shaII be ubIished
at least five working days prior to
opening of the issue, as against the
current provision of two working days
in the case of IPOs. This will provide
more time to the market to analyze the
issue.
f. To bring more lransarency in cailaI
raising, 'GeneraI Cororale Iuroses' as
an ob|ecl of lhe issue has been caed al
25 ercenl of lhe roceeds raised by lhe
issuer as against existing no cap.
g. Where any of lhe merchanl bankers is an
associate of the issuer, these amendment
regulations mandate that it shall disclose
lhe same and shaII decIare ilseIf lo be a
Marketing Lead Manager and its role
shaII be Iimiled lo markeling of lhe
issue.
E. Securities and Exchange Board of India
(Issue and Listing of Debt Securities)
(Amendment) Regulations, 2012 w.e.f.
October 12, 2012
The key features of these amendment
reguIalions are given beIov:
a. Disclosures in relation to privately
pl aced bonds: The amendment
regulations introduced a standard
template for disclosures on terms of
the issue, financial information and
IegaI covenanls in oer documenls for
rivaleIy Iaced debl securilies. Some
additional disclosures that have now
been inlroduced are delaiIs of change in
cailaI slruclure over lhe Iasl hve years
and delaiIs of defauIl/deIay in borroving
over lhe Iasl hve years.
1. Shel f di scl osur e document
for private placement of debt
secur i t i es: The amendment
regulations permitted issuers to
have Shelf Disclosure Document
for lhe hrsl lime. In lerms of lhe
amended regulations, an issuer
is not required to file a Shelf
Disclosure Document again if the
subsequenl rivale Iacemenl of
debl securilies is made vilhin a
eriod of 180 days from hIing of
the Shelf Disclosure Document.
Hovever, lhis discIosure documenl
is required lo be udaled vilh
respect to each tranche, containing
details of the private placement
and material changes, if any, in
the information provided in Shelf
Disclosure Document.
F. SEBI (Prohibition of Fraudulent and
Unfair Trade Practices Relating to
Securities Market) (Amendment)
Regulations, 2012 w.e.f. December 11,
2012
A nev cIause '(s)' vas inserled lo sub-
regulation (2) of regulation 4 of the SEBI
(Irohibilion of IrauduIenl and Unfair Trade
Practices relating to Securities Market)
ReguIalions, 2003 lo bring mis-seIIing of unils
of muluaI fund scheme vilhin lhe ambil of
fraudulent or an unfair trade practice.
G. Securities and Exchange Board of India
(Self Regulatory Organisations) 2004
(Amendment) Regulations, 2013 w.e.f
January 7, 2013
These amendment regulations were
broughl oul lo enabIe regislralion of SeIf
Regulatory Organisations (SRO) that
couId regisler and reguIale dislribulors
of mutual funds and portfolio managers.
167
The SRO Regulations were notified on
19.02.2004 bul has nol yel been broughl inlo
force. Notification issued pursuant to the
amendmenl reguIalions, brings inlo force lhe
SRO ReguIalions in reIalion lo dislribulors
engaged by assel managemenl comanies of
muluaI funds and dislribulors engaged by
portfolio managers.
H. Securities and Exchange Board of
India (Issue of Capital and Disclosure
Re qui r e me nt s ) ( Ame ndme nt )
Regulations, 2013 w.e.f February 27, 2013
In order to provide liquidity in the
domestic markets, the amendment regulations
enabIe arliaI lvo-vay fungibiIily of Indian
Depository Receipts (IDRs). Now, IDRs shall
be fungibIe inlo underIying equily shares of
lhe issuing comany in lhe manner secihed
by SII and Reserve ank of India, from lime
to time.
I. Securities and Exchange Board of India
({KYC (Know Your Client) Registration
Agency} (Amendment) Regulations,
2013 w.e.f. March 22, 2013
The SEBI (KRA) Regulations, 2011
were amended to provide that physical
coies of KYC documenls submiued lo lhe
inlermediaries need nol be forvarded lo
the KRA. The KYC information is required
lo be uIoaded by lhe inlermediaries, vilh
proper authentication, on the system of the
KRA. Physical copies of the KYC documents
or aulhenlicaled coies lhereof are lo be
submiued lo lhe KRA vhenever so desired
by lhe KRA.
J. Securities and Exchange Board of India
(Substantial Acquisition of Shares and
Takeovers (Amendment) Regulations,
2013 w.e.f. March 26, 2013
Taking note of concerns raised during
lhe imIemenlalion of lhe SII (SubslanliaI
Acquisition of Shares and Takeovers)
Regulations, 2011 (Takeover Code), the
following changes were made to the Takeover
Code:
a. Public announcement in case of
combined modes of acquisition:
When acquisilion of shares or voling
rights is completed either through
an agreement and one of the other
specified modes, or through one or
more of lhe secihed modes, lhe dale
of lhe ubIic announcemenl viII be lhe
dale on vhich hrsl such acquisilion as
menlioned in lhe ubIic announcemenl
was made. This exception shall apply
only when the acquirer discloses in the
ubIic announcemenl lhe delaiIs of lhe
roosed subsequenl acquisilion.
b. Public announcement in case of
preferential allotment: Earlier, the
date on which the special resolution
approving the preferential allotment was
assed vas considered lo be reIevanl
dale for making a ubIic announcemenl.
After the amendment, the date on which
lhe board of direclors aulhorises lhe
referenliaI issue shaII be considered as
lhe reIevanl dale for making lhe ubIic
announcemenl. Hovever, lhe acquirer is
not allowed to withdraw such an open
oer even if lhe referenliaI issue is nol
successful.
c. Disclosure requirements: The disclosure
requiremenls vere revised lo bring
lhem in Iine vilh lhe SII (Irohibilion
of Insider Trading) Regulations, 1992.
The revised clause clarifies that any
person who acquires shares or voting
rights of the target company is required
to disclose any change in shareholding
168
exceeding two percent, even if such
change results in the shareholding falling
beIov hve ercenl.
d. Relevant date in case of buy-back of
shares: Earlier, a shareholder, who was
nol a arly lo lhe buy-back arrangemenl,
vas under an obIigalion lo reduce
his shareholding within 90 days of
increase in lhe voling righls beyond lhe
rescribed lhreshoId. The amendmenl
regulations have altered this requirement
to state that the period of 90 days shall
be caIcuIaled from lhe dale of cIosure
of lhe buy-back, ralher lhan lhe dale on
vhich lhe voling righls increase beyond
lhe rescribed lhreshoId.
e. Completion of market purchases during
the offer period: As per the earlier
provisions, an acquirer could not acquire
shares or voting rights which triggered
oen oer obIigalions unliI lhe exiry of
lhe oer eriod. In accordance vilh lhe
amendment regulations, acquisition of
shares of the target company may now
be comIeled lhrough referenliaI issue
or lhrough lhe slock exchange seuIemenl
rocess (olher lhan buIk/bIock deaIs)
even vhiIe lhe oen oer is in rocess.
Hovever, such an acquisilion may be
completed only if such shares are kept
in an escrow account and the acquirer
doesnt exercise any voting rights over
such shares.
2. SIGNIFICANT COURT
PRONOUNCEMENTS
I. Supreme Court
A. M/ s. Sahara Indi a Real Est at e
Corporation Ltd. vs. SEBI (Civil Appeal.
No. 9813/2011); M/s. Sahara Housing
Investment Corporation Ltd. vs. SEBI
(Civil Appeal. No. 9833/2011)
a. The Sureme Courl vide ils 31.08.2012
order held that the issue of OFCDs
to more than 50 persons fell within
SII's |urisdiclion and lhe Saharas vere
directed to provide the monies raised
by lhem (aIong vilh inleresl) and lhe
inveslor delaiIs lo SII and SII (WTM)
was directed to refund the investors
along with interest after undertaking
proper verification of the documents
and genuineness of the investors. The
court fixed a period of 10 days for
provision of all the documents and three
months for providing monies to SEBI.
SEBI was directed to take appropriate
measures in case of non-comIiance
of its directions. Justice B N Agrawal
(Retd.) was appointed to oversee the
entire process.
b. Saharas have conlinued lo non-comIy
with the SC directions citing various
pretexts. SEBI accordingly filed its
status reports (three as on date) with
lhe SC Regislry. Saharas aIso hIed lvo
applications in SAT with a view to
exlend lhe limeIines for submiuing lhe
documents and the refund amount to
SII. These aIicalions vere re|ecled by
SAT, with a direction to approach SC for
any reIiefs. y a subsequenl aIicalion
of the Saharas, Supreme Court directed
Saharas to immediately deposit ` 5,120
crore and 10,000 crore by 1sl veek of
}anuary, 2013 and resl by 1sl veek of
Ieb, 2013.
B. M/s. P.G.F. Ltd. vs. Union of India
(Civil Appeal No. 6572 of 2004)
a. SII, vide ils order daled December 6,
2002, ruIed lhal lhe business aclivily of
169
lhe M/s I.G.I. Limiled, nameIy, lhe saIe
and development of agricultural land,
as veII as ils |oinl venlure schemes,
were all collective investment schemes.
It further directed that since the M/s
I.G.I. Limiled faiIed lo comIy vilh
the statutory requirement as provided
under the SEBI (Collective Investment
Schemes) ReguIalion, 1999, M/s I.G.I.
Limited shall neither collect any money
from investors nor launch any new
scheme and it shall refund the money
collected under the schemes, and failing
which threatened to initiate actions as
avaiIabIe under lhe SII Acl, 1992 and
SEBI (Collective Investment Schemes)
Regulation, 1999.
b. Aggrieved by lhe aforemenlioned SII
order, the appellant preferred an appeal
before lhe Hon'bIe High Courl of Iun|ab
and Haryana. The Hon'bIe High Courl,
in its order dated July 26, 2004, upheld
the validity of section 11AA of the SEBI
Act, 1992.
c. M/s I.G.I. Lld. hIed an aeaI before
lhe Hon'bIe Sureme Courl againsl lhe
order of lhe Hon'bIe High Courl. The
Hon'bIe Sureme Courl, in ils order
daled March 12, 2013, heId lhal seclion
11AA is a vaIid rovision, nol suering
from any inhrmily, as il does nol inlrude
into the specific activities of sale of
agricultural land and its development.
Therefore, there was no scope to apply
Entry 18 of List II of Seventh Schedule in
order to strike down the said provision
on the ground of legislative competence.
The Hon'bIe Sureme Courl reasoned
lhal a delaiIed anaIysis of sub-seclion
(2) of section 11AA of SEBI Act, 1992,
vhich dehnes a coIIeclive inveslmenl
scheme, disclosed that it is not restricted
to any particular commercial activity
such as a shop or any other commercial
eslabIishmenl or even agricuIluraI
operation or transportation or shipping
or entertainment industry etc. The
dehnilion onIy seeks lo ascerlain and
identify any scheme or arrangement,
irreseclive of lhe nalure of business,
vhich auracls inveslors lo invesl lheir
funds at the instance of someone else
who comes forward to promote such
scheme or arrangemenl in any heId and
such scheme or arrangement provides
for the various consequences to result
there from.
d. Il ruIed lhal lhe aramounl ob|ecl of lhe
Parliament in enacting the SEBI Act itself
and in particular the addition of section
11AA was with a view to protect the
guIIibIe inveslors mosl of vhom are oor
and uneducated or retired personnel
or lhose vho beIong lo middIe income
group and who seek to invest their hard
earned reliremenl benehls or savings in
such schemes with a view to earn some
suslained benehls or vilh lhe fond hoe
that such investment will get appreciated
in course of time. In this regard, the
Hon'bIe Sureme Courl noled lhe
conducl of lhe M/s I.G.I. Limiled in
having perpetrated this litigation was
frivolous and vexatious in every respect,
righl from ils inilialion in lhe High
Courl by chaIIenging lhe vires of seclion
11AA of the SEBI Act without any
subslanlive grounds and in lhal rocess
prolonged this litigation for more than a
decade and lhereby rovided scoe for
defrauding its customers who invested
their hard earned money in the scheme
of sale of land and its development. As
lhe Hon'bIe Sureme Courl concIuded
170
that the appellants had not approached
the Court with clean hands, it imposed
exemplary costs of Rs. 50 lakh, while
dismissing the appeal.
e. It further held that the activity of the
M/s I.G.I. Limiled, nameIy, lhe saIe
and development of agricultural land
squarely fell within the definition of
collective investment scheme under
Seclion 2(1)(ba) read aIong vilh
section 11AA of the SEBI Act, 1992 and
consequently SEBIs order was perfectly
|uslified and lhere vas no scoe lo
inlerfere vilh lhe same. The Hon'bIe
Supreme Court directed the Central
Bureau of Investigation as well as the
Department of Income Tax to conduct
roer invesligalion. The Hon'bIe
Supreme Court also directed SEBI to
proceed with its investigation/enquiry
and inseclion of lhe M/s I.G.I Limiled
as veII as aII ils olher ocers and olher
remises and afler due enquiry lo be
carried out in accordance with law, take
necessary steps for ensuring the refund
of lhe monies coIIecled by lhe M/s I.G.I
Limited in connection with the sale
and development of land to its various
customers.
II. High Courts
A. M/s. Ram Kaashyap Investment Ltd
(RKIL) vs. SEBI & Shri Venkataramani
vs SEBI (W. P. Nos. 1214/2013 &
1292/2013) - Before Honble Madras
High Court
a. Vide order daled 31. 12. 2012, lhe
petitioners (the company and its
romoler) in lhe sub|ecl cases had
been reslrained from accessing lhe
securilies markel and furlher rohibiling
lhem from buying, seIIing or olhervise
dealing in the securities, directly or
indirectly, for a period of two years from
the date of the order under section 11
and 11 of lhe SII Acl in lhe mauer
of alleged violations with respect to the
rights issue of M/s RKIL.
b. The company M/s RKIL is listed in
ombay Slock Ixchange and Madras
Stock Exchange. It came out with
rights issue. The issue opened on
18.11.2010 and closed on 16.12.2010.
SEBI noticed several complaints from
inveslors regarding non-receil of
Composite Application Forms (CAFs)
during the routine inspection of Knack
Corporate Services Private Limited,
the Registrar to an issue (RTI) of the
rights issue of M/s RKIL and it was
noticed during inspection that CAFs
were not dispatched as mentioned in the
adverlisemenls issued by M/s RKIL and
the RTI had produced forged records/
documents with regard to proof of
dispatch of CAFs and further M/s RKIL
had nol received minimum subscrilion
in the rights issue and the promoter of
M/s RKIL A Venkataramani had failed
lo bring in his conlribulion before lhe
closure of the rights issue. It was also
noliced by SII, during lhe inseclion,
vari ous non- comI i ances of l he
provisions of the ICDR Regulations, 2009
and DP Regulations, 1996, concealment
of material information and making
misleading disclosures with regard
to the rights issue and thus violating
rovisions of SII (IIUTI) ReguIalions,
2003 by M/s RKIL and ils romoler, i.e.,
the petitioners herein.
c. The Hon'bIe }udge vas Ieased lo
dismiss the writ petitions on the ground
171
of mainlainabiIily before lhe High Courl
since the statutory appellate remedy is
avaiIabIe under lhe SII Acl.
d. The petitioners argued that one man
AeIIale TribunaI funclioning nov
cannot take up the appeal as it lacks the
necessary forum and that Rule 5(2) of the
SAT (Procedure) Rules, 2000 deals with
lhe Iresiding Ocer for a shorl vhiIe
and nol on a ermanenl basis and RuIe
18 says lhal every order of lhe TribunaI
has lo be signed by lhe Iresiding Ocer
and lhe lvo members or eIse il cannol
be an order assed by lhe AeIIale
TribunaI.
e. The Courl observed lhal the order
passc! |q S|B|, an appca| nas ic |c |c!
before the Appellate Tribunal and Section
29 of the Act enables the Government to
make Rules for carrying out the purpose
cj inc Aci an! inc nciicaiicn issuc! |q
the Central Government under Rule 5(2)
is valid in law. The Petitioners herein have
nci cna||cngc! inc |u|cs ncr inc nciicaiicn
issued thereunder..........The contention that
only one member that too, a non-judicial
member is functioning as on today would
not hold water as the Appellate Tribunal is
functioning as on today and discharging its
functions as per law. Any rule has to be read
meaningfully and what is applicable to two
members is applicable to one member. It is a
necessity which has to be accepted.
f. Il furlher observed lhal unfortunately
the arguments advanced on behalf of
the petitioners are a competency of a
single member Appellate Tribunal which
is not the issue in the writ petition. Both
the petitioners have not challenged nor
questioned the functioning of the single
member Appellate Tribunal. The issue raised
before him is that whether alternative remedy
of appeal as provided in the Act is a bar to
entertain these writ petitions. On a perusal
of the Act and the rules made thereunder, I
an cj inc ccnccrnc! ticu inai a ju|| c!gc!
appeal is provided under the Act, that too,
with a member having special and technical
knowledge in the relevant field. In such
circunsianccs, | !c nci n! anq rcascn ic
waive on the appeal remedy and to entertain
the writ petition.
B. Shri Sandeep Jain vs. Union of India
and Others (W.P. No. 5847 of 2012)
Before Honble High Court of Bombay
a. A writ petition under Article 226 of
the Constitution of India was filed
chaIIenging an ad|udicalion order of
SEBI. From this order, the petitioner
had aIso fiIed an aeaI before lhe
Securilies AeIIale TribunaI (SAT). In
this writ petition, the petitioner had
rayed for a direclion lo lhe Union of
India lo aoinl lhe residing ocer
in SAT for hearing appeals including
lhe aeaI hIed by lhe elilioner. The
petitioner also prayed for a writ of
rohibilion lo rohibil members of SAT
from funclioning as ocialing residing
ocers.
b. The Court ruled that there was no
impediment in the petitioners appeal
being heard by SAT, vhich al lhal lime
had lvo members, one of vhom vas
aulhorized by lhe governmenl lo reside
over SAT, in accordance with SAT
(Irocedure) RuIes, 2000. The ombay
High Courl observed lhal lhe rovisions
of the SEBI Act and the SAT (Procedure)
RuIes, 2000 have lo be conslrued
reasonabIy. AccordingIy, il heId lhal lhe
LegisIalure and ruIe-making aulhorily
couId nol have inlended lhal a siuing
172
member is emovered lo reside
over lhe siuing of SAT, onIy vhen lhe
reguIar residing ocer is nol avaiIabIe
for a short period and that such an
arrangemenl cannol be made vhen a
regular presiding officer retires or is
olhervise nol avaiIabIe on a ermanenl
basis.
C. SEBI Vs. M/s. A.P.L Industries Ltd.
(C.W. P NO. 1261/02)-Before Honble
High Court of Delhi
a. The Wril elilion vas fiIed by SII,
inler-aIia seeking quashing lhe order
daled Oclober 18, 2000 assed by lhe
aeIIale aulhorily (lhe CenlraI Govl.),
and also seeking a direction to the
Respondent company to comply with
order daled May 22, 1998 assed by SII
and refund all the monies collected in
resecl of lhe ubIic issue.
b. The comany came oul vilh a ubIic
issue of 30,00,000 equily shares of ` 10
on Ieb 26, 1996. The issue oened on
Iebruary 26, 1996 and cIosed on March
08, 1996. On the date of closure the
issue vas oversubscribed (1.75 limes).
SubsequenlIy, lhere vere vilhdravaIs of
aIicalions vhich look lhe subscrilion
IeveIs beIov slalulory minimum IeveI
rescribed lhereby rendering lhe issue
undersubscribed. SII vide order daled
May 22, 1998 directed the company
to refund the application moneys to
investors. The said order was challenged
by lhe comany by fiIing an aeaI
before lhe lhen aeIIale aulhorily
rescribed under lhe SII Acl, i.e. lhe
CenlraI Governmenl. AeIIale aulhorily
vide ils order daled Oclober 18, 2000
sel aside lhe SII order. Aggrieved by
the said order of the appellate authority
SII hIed lhe resenl vril elilion.
c. The Hon'bIe Courl afler hearing
argumenl aIIoved lhe vril elilion hIed
by SII and direcled lhe comany lo
refund the collected amount with the
inleresl and observed lhal: ...11. Having
regard to the aforesaid, I am of the view
that the order of the SAT deserves to
be sel aside. Il is ordered accordingIy.
In lhal viev of lhe mauer, lhe order of
the Chairman SEBI dated 22.05.1998
vouId have lo be suslained and lhe
directions contained therein for refund
of the money to the share applicants
vouId have lo be imIemenled. Il is
ordered accordingly. The SEBI shall
ensure that refund is made to the share
aIicanls, as exediliousIy as ossibIe,
in accordance vilh Iav. Dehciency, if
any, shaII be recovered from resondenl
no.1/comany, once again, by laking
recourse to the relevant provisions of
law...
D. M/s. DLF Ltd. vs. SEBI and ors. (L.P. A
No. 100 of 2012)- Before Honble High
Court of Delhi
a. The LIA vas hIed againsl lhe Hon'bIe
High Courl order daled }anuary 03, 2012
assed in lhe mauer of WI No. 8128
of 2011. The Ld. Single Judge vide the
said order was pleased to upheld SEBI
order daled Oclober 20, 2011 vide vhich
investigation was ordered.
b. M/s DLI vas aggrieved by an order
daled 20.10.2011 made by WTM. The
order of SEBI held that investigations
vouId be made by il inlo lhe comIainls
dated 04.06.2007 and 19.07.2007 made
by lhe second resondenl, Mr. Kimsuk
Krishna Singha, against M/s DLF, and
M/s Sudipti Estates Private Limited, the
third respondent (hereafter Sudipti).
SEBIs order indicated that investigations
173
vouId be made inlo lransaclions and
the alleged violations of the erstwhile
SEBI (Disclosure and Investor Protection)
GuideIines 2000 (lhe GuideIines)
read with the relevant provisions of the
Companies Act, 1956. SEBI also indicated
that an investigating authority would
Iook inlo lhe maller, vilhoul being
re|udiced by any observalions made in
the SEBIs order, and would complete
investigations expeditiously, and if any
vioIalions vere found, lhey are lo be
proceeded with in accordance with law.
c. The Courl observed lhal no secific
violations of a particular Section of the
Comanies Acl or lhe DII GuideIines
are mentioned and it does not vitiate the
order, as lhe hrsl slage of invesligalion is
onIy reIiminary and based on reasoning
rovided by lhe SII, il vas advised lo
appoint an Investigating Authority to
further determine the veracity of these
cIaims. Indeed, il is nol for lhe High
Courl lo second-guess lhe reasoning
of the SEBI, as long as a deferential
review does not reveal any extraneous
circumstances. On this aspect too, this
Courl is of oinion lhal lhe hndings of
lhe Iearned singIe |udge do nol caII for
interference.
III. Securities Appellate Tribunal
A. Shri Victor Fernandes & another vs.
NSE & Others (Appeal No. 219 of 2012)
- Before Honble Securities Appellate
Tribunal
a. The calioned aeaI vas hIed againsl
the decision of NSE, viz circular dated
Oclober 15, 2012, in granling Iisling
and trading approval of the equity
shares issued by resondenl no. 4, i.e.
M/s Network 18, pursuant to its rights
issue vhich cIosed for subscrilion on
Oclober 04, 2012. SII has been arrayed
as Respondent no. 9 in the appeal.
b. Hon'bIe Securilies AeIIale TribunaI
(SAT) noted that the grievance of the
appellants was that they made multiple
representations to various entities
incIuding SII, comIaining aboul
violation of various rules and regulations
by resondenl nos. 4 and 5 i.e. M/s
Network 18 Media & Investment Limited
and M/s TV 18 Broadcast Limited,
respectively, relating to the said right
issue; the concerned entities have failed
to take action necessary to protect the
interest of investors.
c. The Hon'bIe SAT vas of lhe viev
lhal lhe aeIIanls cannol be said lo
aggrieved as they have participated and
benehled from lhe said righls issue. AIso
the appellants have made no prayer for
seuing aside or canceIIing of lhe said
rights issue.
d. Hon'bIe SAT reIied on lhe rinciIe
as Iaid dovn in Mr. }asbhai Molibhai
Desai Vs Mr. Roshan Kumar, Mr. Ha|i
Bashir Ahmad & Ors [(AIR (1976)
SC 578j vhich vas aIso foIIoved by
SAT in Appeal no. 142 of 2008 Mr.
haralbhai aIdev Shah & ors Vs SII
& Ors decided on Oclober 06, 2009 and
was of the view that the appellants
have failed to show how the listing
ermission granled by NSI by lhe
impugned circular has affected their
legal rights or caused legal wrong or
in|ury lo lhe aeIIanls. Il hnds lhal lhe
aeIIanls' grievance does nol ov from
the impugned circular of NSE.
e. SAT was of the view that the appellants
in lhe garb of chaIIenging lhe aforesaid
174
circuIar of NSI are in eecl chaIIenging
decision of some of the respondents on its
various representations. It has also noted
that the various representations made to
SEBI were examined and appropriately
responded to the appellants and if the
aeIIanls vere nol salished vilh lhe
response/reply received it could have
availed appropriate remedy against those
responses.
f. In viev of lhe above, SAT heId lhal lhal
appellants are seeking multiple reliefs
against various respondents which are
in the nature of a direction not covered
vilhin lhe scoe of Seclion 23L of
Securities Contracts (Regulations) Act,
1956 and thus dismissed the appeal
againsl lhe circuIar daled Oclober 15,
2012 of NSI as nol mainlainabIe.
B. (A) Dipak Patel Vs. SEBI (Appeal No.
216/2011); (B) Kanaiyalal Baldevbhai
Patel Vs. SEBI (Appeal No. 74/2012);
(C)Anandkumar Ba!dcvbhai Patc!
Vs. SEBI (Appeal No. 78/2012 )- In the
matter of Passport India Investment
(Mauritius) Limited- Before Honble
Securities Appellate Tribunal
a. The captioned appeals were filed
againsl lhe orders of lhe Ad|udicaling
Officer daled Selember 30, 2011,
imposing a penalty of five crore on
each of the appellants captioned at
A and above and one Crore on lhe
aeIIanl al C above, for lhe vioIalion
of ReguIalion 3 (a), (b), (c) & (d) of SII
(Irohibilion of IrauduIenl and Unfair
Trade Practices Relating to Securities
Markel) ReguIalions, 2003 (ReguIalion
of 2003). The aeIIanl al A vas heId
to have acted in manipulative manner
lhereby |eoardizing lhe inlegrily of lhe
securilies markel by assing sensilive
informalion aboul lhe lrades of M/s
Passport India Investment (Mauritius)
Ltd. (Passport) to the appellant at
B, who was a connected entity. The
aeIIanl al vas lhereby enabIed in his
activities akin to a front running, qua the
lrades of M/s Iassorl, vho made un|usl
rohls by lrading on lhe basis of such
sensitive information. The appellant at
C was held to have acted as a conduit to
the other two appellants and had acted
as a channeI lhrough vhich lhe non-
ubIic rice sensilive informalion vas
assed on lo lhe aeIIanl al above.
b. The Hon'bIe SAT aIIoved lhe calioned
appeals and set aside the orders of the
Ad|udicaling Ocer, inler aIia, on lhe
following grounds:
i. The Securities and Exchange Board
of India (Irohibilion of IrauduIenl
and Unfair Trade Iraclices ReIaling
to Securities Market) Regulations,
1995, (ReguIalions) rohibiled
fronl running by any erson
dealing in the securities market.
Hovever lhe ReguIalions of 2003
has secificaIIy banned fronl
running onIy by lhe inlermediaries
(reguIalion 4(2) (q). In lhe absence
of any secihc rovisions in lhe
Securities and Exchange Board of
India Act, 1992, (SEBI Act), rules
or reguIalions rohibiling fronl
running by a erson olher lhan an
intermediary, the appellants could
nol be heId guiIly of lhe said acl
as they were not intermediaries
under the SEBI Act or any rules or
regulations.
ii. If al aII any fraud has been
commilled by lhe aeIIanls,
175
lhe same vas commiued againsl
M/s Iassorl and il cannol be
said to have acted as a fraud on
the securities market as a whole,
especially so when all the trades
of the appellants were executed
lhrough screen based lrading
system and at the then prevailing
market prices.
c. The said order of lhe Hon'bIe SAT has
been chaIIenged before lhe Hon'bIe
Supreme Court of India on several
grounds of law and the decision of the
apex court in this regard is awaited.
C. Mr. V. K. Kaul and Mrs. Bala Kaul
Appellant versus The Adjudicating
Omccr, 5ccuritics and Exchangc Bnard
of India Respondent
a. Ad|udicaling Ocer, SII had heId lhe
appellants guilty of violating Section
12A (d) and (e) of the Securities and
Exchange Board of India Act, 1992 (the
Act) and imposing a penalty of ` 50 lakh
and ` 10 lakh respectively under Section
15G (i) of lhe Acl.
b. Mr. V. K. KauI vas a non-execulive
indeendenl direclor of M/s Ranbaxy
Laboralories Limiled (Ranbaxy). M/s
Ranbaxy is lhe arenl comany of
M/s Solrex Pharmaceuticals Limited
(Solrex). SEBI had investigated the
dealings in the scrip of M/s Orchid
Chemicals and Pharmaceuticals Ltd.
(the target company). Solrex made large
investments in the scrip of the target
company. It was noted that Mrs. Bala
Kaul wife of Mr. V. K. Kaul had traded
in the scrip of the target company ahead
of Iarge inveslmenls made by SoIrex in
the target company. The funds for the
said lrading vere rovided by Mr. V. K.
Kaul. This trading was allegedly done on
lhe basis of UnubIished Irice Sensilive
Informalion (UISI) avaiIabIe vilh Mr. V.
K. KauI lo lhe eecl lhal SoIrex is going
to invest large amounts in the scrip of
the target company.
c. Mr. V. K. KauI, being an insider,
urchased 35000 shares of lhe largel
comany on behaIf of his vife ahead
of trading in the scrip of the target
comany by SoIrex. Il vas, lherefore,
aIIeged lhal lhe aeIIanl, being a
connecled erson of Ranbaxy under
Regulation 2(c) (i) of the Securities and
Ixchange oard of India (Irohibilion of
Insider Trading) Regulations, 1992, was
an insider and lraded on behaIf of his
wife in the scrip of the target company
based on UISI in his ossession and,
thus, violated Section 12A (d) and (e) of
the Act.
d. Il vas argued by lhe Iavyer of AeIIanl
lhal lhe ad|udicaling ocer of lhe oard
has erred in holding that the decision of
Solrex to purchase shares of the target
comany is UISI. As er lhe dehnilion
of price sensitive information under
Regulation 2(ha) of the regulations, only
such informalion, vhich, if ubIished,
is IikeIy lo maleriaIIy aecl lhe rice
of lhe securilies of lhe comany can be
treated as price sensitive information.
Further, in terms of Regulation 2(k),
lhe acluaI ubIicalion of UISI can be
underlaken onIy by lhe comany lo
vhich lhe UISI erlain. In lhe inslanl
case, lhe informalion urorled lo be
UISI erlains lo lhe securilies of lhe
target company and the target company
vouId never have been in a osilion lo
ubIish such informalion as il vas nol
rivy lo lhe urorled UISI. Therefore,
176
according to him, information relating
to a third party investor seeking to
buy shares of a Iisled comany from
lhe markel cannol be lrealed as UISI
regarding the target company.
e. The respondent argued that the term
'rice sensilive informalion' as dehned in
the regulations is wide enough to include
any information relating directly or
indirectly to a company. The regulations
do nol require lhal lhe UISI musl be in
the possession of or in the knowledge
of the company in whose securities the
insider deals. If an insider deals in the
securities of a company listed on any
stock exchange when in possession of
UISI reIaling lo lhal comany, reguIalion
3(i) of lhe reguIalions viII gel auracled.
Regulation 2(ha) of the regulations
dehnes 'rice sensilive informalion' lo
mean any information which relates
directly or indirectly to a company
vhich, if ubIished, is IikeIy lo maleriaIIy
aecl lhe rice of securilies of comany.
A bare reading of lhe aforesaid rovisions
make it clear that the information must
relate to a company and not necessarily
the company which is dealing into the
shares.
f. SAT accepted that the term price
s ens i t i ve i nf or mat i on us ed i n
regulation 2(ha) is wide enough to
include information relating directly or
indirectly to a company. The Solrex had
decided to purchase shares of the target
comany. Here, SoIrex is 'lhe comany'
and Target Company is a company.
The decision of Solrex to purchase
shares of the target company is likely to
maleriaIIy aecl lhe rice of securilies
of the target company. Only the insiders
of SoIrex are avare aboul lhis decision
of the company. If the insiders of Solrex
are allowed to trade in the shares of the
target company ahead of purchase of
shares by SoIrex, sureIy lhe lrading viII
be on lhe basis of insider informalion.
The decision of Solrex to purchase shares
of lhe largel comany is, lherefore, UISI
for the insiders of Solrex and they are
rohibiled from deaIing in lhe shares of
the target company till such information
becomes ubIic. As Iong as, an insider
of the company deals in the securities
of a company listed on any stock
exchange vhiIe in ossession of UISI
relating to that company, the provisions
of ReguIalion 3(i) of lhe reguIalions viII
gel auracled.
D. Shri N. Narayanan vs. SEBI
a. In lhe mauer of M/s Iyramid Saimira
Theatre Ltd, investigations revealed
that the financial results contained
in lhe quarlerIy reorl hIed vilh lhe
stock exchanges contained inflated
hgures of lhe comany's revenue rohls,
securily deosils and receivabIes. The
maniuIalion in lhe hnanciaI resuIls of
the company resulted in price rise of the
scrip of the company and the promoters
Iedged lheir shares lo raise subslanliaI
funds from hnanciaI inslilulions. Il vas
also alleged that the company and its
direclors ubIished/ caused lo ubIish
faIse and misIeading hnanciaI resuIls
of lhe comany. The annuaI hnanciaI
resuIls for lhe year 2007-08 reorled lo
lhe slock exchanges conlained inaled
hgures of lhe comany's revenue rohls,
securily deosils and receivabIes vhich
vere reIied uon by inveslors for
making investment decision while the
said reorls did nol reecl a lrue and
fair viev of lhe aairs of lhe comany.
177
Therefore, inler-aIia, Shri N Narayanan,
Iromoler and WhoIe Time direclor of
the company, was found to have violated
ReguIalions 3 and 4 of lhe Securilies and
Ixchange oard of India (Irohibilion
of IrauduI enl and Unfai r Trade
Practices Relating to Securities Market)
ReguIalions, 2003 (IIUTI ReguIalions).
Therefore, monetary penalty of ` 50
lakh was imposed on Shri N Narayanan
and he vas aIso reslrained from buying,
selling or dealing in securities in any
manner whatsoever or accessing the
securities market directly or indirectly
and from being a direclor of any Iisled
company for a period of two years. The
said orders vere aeaIed in lhe Hon'bIe
SAT and lhe Hon'bIe SAT, vide orders
daled Oclober 5, 2012, uheId lhe SII
directions.
178
PART FIVE: ORGANISATIONAL MATTERS
1. SEBI BOARD
During the financial year 2012-13,
Shri Prashant Saran, Whole Time Member,
reIinquished lhe charge of Oce of lhe WhoIe
Time Member, SEBI on expiry of his term of
appointment on May 17, 2012. He was again
appointed as Whole Time Member of SEBI
under clause (d) of sub-section (1) of Section
4 of the SEBI Act, 1992 by Government of
India vide nolihcalion daled Augusl 8, 2012.
Shri Saran assumed charge as Whole Time
Member on August 9, 2012.
Dr. Arvind Mayaram, Secretary, Ministry
of Iinance, Dearlmenl of Iconomic Aairs,
Government of India was nominated as one
of the Members on the SEBI Board in terms
of Governmenl of India nolihcalion daled
August 24, 2012 in place of Dr. Thomas
Mathew.
Shri Prakash Chandra Chhotaray, was
nominated as a Part-Time Member of SEBI,
under clause (d) of sub section (1) of Section 4
of the SEBI Act, 1992 by Government of India
vide nolihcalion daled AriI 12, 2012.
Shri S. Raman, Whole Time Member,
was appointed as Whole Time Member
of SEBI under clause (d) of sub-section
(1) of Section 4 of the SEBI Act, 1992 by
Governmenl of India vide nolihcalion daled
December 28, 2012. Shri Raman assumed
charge as Whole Time Member on the same
day.
During the year 2012-13, SEBI Board met
on six occasions and delaiIs of lhe auendance
of the meetings are presented in Table 5.1.
2. AUDIT COMMITTEE
In pursui t of hi gh standards of
governance and transparency, the SEBI
Board, in its 127th meeting held on September
22, 2009, consliluled an Audil Commiuee lo
exercise oversighl of SII's hnanciaI reorling
process and disclosure of its financial
information.
The Commi t t ee compri ses t hree
members nominated by the Board. The tenure
of the members of the Committee is two
years. The Commiuee is resenlIy chaired by
Shri V.K. Jairath. Shri Rajeev Kumar Agarwal
(WTM, SEBI) and Shri Prakash Chandra
Chhotaray (Part-time member, SEBI) are the
other two members.
Shri Prakash Chandra Chhotaray was
nominaled lo lhe Commiuee by lhe oard
in ils meeling heId on March 08, 2013, in
place of Dr. Thomas Mathew. During the
Table 5.1: Board Meetings during 2012-13
Number of Number of
Particular Meetings Meetings
hc!d aucndcd
1 2 3
(i) Chairman
Shri U. K. Sinha 6 6
(ii) Whole Time Member
Shri Prashant Saran 5* 6
Shri Rajeev K. Agarwal 6 6
Shri S. Raman 2* 2
(iii) Members
Dr. Arvind Mayaram 3* 1
Shri Naved Masood 6 4
Shri V. K. Jairath 6 5
Shri Anand Sinha 6 4
Shri P. C. Chhotaray 5* 5
* Number of meetings held after assuming the charge.
Note:
Or. Tncnas Maincu abcn!c! 2 cui cj 3 ncciings nc|!
!uring inc qcar, pricr ic nis !cnibing inc O[cc cj inc
Part-Time Member.
Snri Prasnani Saran abcn!c! 1 cui cj 1 ncciing nc|!
!uring inc qcar, pricr ic nis !cnibing inc O[cc cj inc
Wnc|c-Tinc Mcn|cr cn Maq 17, 2012 an! abcn!c! 4
cui cj 4 ncciings nc|! !uring inc qcar su|scqucni ic nis
assuming charge again as Whole Time Member on August
08, 2012.
179
Part Fivc: Organisatinna! Maucrs
hnanciaI year 2012-13, lhe Commiuee heId
four meetings.
The Commiuee carried oul lhe foIIoving
responsibilities:
a. Reviewed the internal audit reports
with the management and the internal
auditors
b. Reviewed the action taken by the
managemenl lo reclify dehciencies and
implement suggestions as pointed out by
the internal auditors
c. Reviewed the investment policy of SEBI
d. Reviewed and discussed the Quarterly
statement of accounts of SEBI for the
quarters ended June, September and
December 2012.
Pursuant to the suggestions made by
lhe Commiuee, SII imIemenled quarlerIy
closing of accounts and e-payment to
suppliers, contractors etc. The Committee
eecliveIy coordinaled vilh lhe managemenl
and the internal auditors and helped in
bringing the improvement of the internal
control systems.
The Commiuee revieved and discussed
the annual statement of accounts of SEBI
for the year 2012-13 with the management
of SEBI and internal auditors. Relying on
the review and discussions conducted with
the management and internal auditors, the
Audil Commiuee beIieves lhal SII's annuaI
statement of accounts is fairly presented
in conformity with the Generally Accepted
Accounting Principles (GAAPs) in all material
asecls. The Commiuee aIso revieved lhe
internal control systems put in place and
expressed its satisfaction with the same.
The members of lhe Commiuee discussed
among themselves, without the management
or the internal auditors being present,
the information disclosed in the Annual
Statement of Accounts. The Committee
fuIhIIed ils resonsibiIilies in comIiance vilh
its charter.
3. ORGANISATIONAL
RESTRUCTURING CELL
I. Lnca! Omccs
SEBI Board in its meeting held on March
25, 2011 had suggested SEBI to explore the
scoe of slrenglhening ils regionaI oces and
the investor should get the services of SEBI at
his door step to promote a balanced, pan India
securities market. Physical proximity of SEBI
oce lo inveslors and inlermediaries vouId
promote deepening and broadening of the
securities market. Accordingly it was felt that:
a. there is a need to strengthen the regional
offices by delegating the additional
activities/works to them, and
b. lhere is a need lo oen IocaI oces in
various state capitals to service investors
in the locality.
SubsequenlIy, on }uIy 28, 2011, lhe
Board had approved the proposal relating to
slrenglhening of RegionaI Oces (ROs) and
graduaI oening of nev LocaI Oces (LOs)
in state capitals. The implementation of the
decision lo oen IocaI oces vas done in
phases, the details of which are below:
a. In Ihase-I for hnanciaI year 2011-12 lhree
IocaI oces vere oened al Hyderabad,
Guwahati and Lucknow.
b. In Ihase-II for lhe hnanciaI year 2012-
13 were opened at Jaipur, Chandigarh,
Indore, Bengaluru, Kochi, Patna and
Bhubaneshwar.
c. In Ihase III, for hnanciaI year 2013-14,
it has been decided to open the local
180
oces al lhe remaining slale cailaIs
other than North-East. The state capitals
included Ranchi, Raipur, Panaji, Shimla,
Dehradun and Srinagar.
The IocaI Oces are underlaking lhe
following activities:
a. Redressal of investor grievances received
directly from investors in writing and
through online mechanism of SCORES
and taking them with listed companies
and intermediaries in their state.
b. Inveslor avareness and hnanciaI Iileracy
in their territorial jurisdiction.
c. Monitoring and processing payment etc.
of empanelled Resource Persons.
d. Organize and participate in Seminars,
Conferences on investor awareness and
hnanciaI Iileracy, grievance redressaI, elc.
e. Gathering market intelligence from local
media or through other sources.
f. Assisting in investigation, inspection and
litigation related activities.
II. Redesigning SEBIs Role
SEBI felt the need to revisit its
organisational capabilities to ensure that
these are relevant in the dynamic market
environment. Accordingly, SEBI Board
approved the proposal to engage an
independent reputed consultant to revisit
the structural and organisational issues,
re-prioritize areas of focus and look at the
technological and man power needs with
the emphasis on attracting and retaining
good quality talent. Consequently, for the
appointment of consultant, a Consultant
IvaIualion Commiuee (CIC) vas consliluled
by SEBI. Based on the recommendations of
CEC, M/s. Oliver Wyman was appointed
for Redesigning SEBIs Functions, Role,
Structure & Vision.
For the monitoring of the project a Project
Sleering Commiuee (ISC) vas consliluled
on July 17, 2012 to look into a) Overall
project management and communication, b)
issues resolution, c) advice and counsel to
project team and consultants; and d) thought
leadership and expert input. The designated
Consultant, M/s. Oliver Wyman started
working on the project since July 23, 2012.
The Consultant had several rounds meetings
with the PSC also one-on-one meeting with
Whole Time Members and Executive Directors
of SEBI for guidance from time to time. A
ConsuIlanl Moniloring Commiuee (CMC) vas
constituted as per the Ministry of Finance/
Central Vigilance Commissions guidelines.
To make the project successful, the
consultant was facilitated to get inputs from
muIliIe forums invoIving SII sla across
all functions and seniority levels and to
make presentations to the SEBI Board and
International Advisory Board of SEBI. The
consultant also met external stakeholders
which includes brokerage houses, wealth
managers, global and domestic banks active
in institutional broking and merchant
banking, leading investor associations, stock
exchanges and former SEBI Chairmen.
The consultant discussed the preliminary
recommendations with Dy. Governor, Reserve
Bank of India, Shri Anand Sinha on December
28, 2012 and aIso had meeling vilh Shri R.
K. Nair, Whole Time Member, Insurance
Regulatory and Development Authority on
December 26, 2012. The Consultant also had
audience of Honble Finance Minister on
March 13, 2013 on their recommendations.
The hnaI reorl is sliII under rearalion.
4. HUMAN RESOURCES
Human Resources Development (HRD)
Division continued to play an important
181
role with prime focus on implementation
of policies on capacity building, training,
promotions, placement and transfers.
I. 5ta 5trcngth, Rccruitmcnt and
Deputation
During lhe hnanciaI year 2012-13, SII
had recruiled 60 ocers in Grade A, lhree in
Grade B and one in Junior Assistant Grade
in an eorl lo augmenl ils sla slrenglh in
various areas. As on March 31, 2013, SEBI
has a total of 666 employees in various grades
553 vere ocers and 113 comrised of
secrelaries and olher sla.
II. Bcncts
Many benefits have been extended
or introduced during the year for staff
members. Scheme for purchasing computers
/ computer-related items has been introduced
for all staff members including those on
contract/deputation. Paternity leave has
been introduced for male staff members.
Entitlements of lodging allowance and halting
allowance have been introduced for staff
members transferred at the Boards instance.
Entitlement limit towards reimbursement
of vehicle maintenance expenses has
been revised for Executive Directors; also
reimbursement towards drivers salary has
been revised for lhe eIigibIe ocers. AIso
nev benehls and aIIovances vere exlended
lo ocers in Grade A, }unior Ingineers in lhe
cadre of Junior Assistants and to secretarial
sla. MedicaI Assislance Iund (MAI) has
also been introduced to provide financial
assistance for meeting a part of medical
exenses incurred by sla members.
HRD division always endeavours to
encourage the employees of the Board to
pursue higher studies and upgrade their
skills. As such, collaborations were made with
CIA Inslilule, USA for lhe CIA cerlihcalion
and with XBRL International Inc. for the
XRL cerlihcalion. 27 enroImenls have been
made for the CFA course and 15 for the
XBRL course during the year under the
collaborations. The courses of study available
under lhe scheme of benehls for acquiring
rofessionaI quaIihcalions / cerlihcalions have
also been revised and updated.
III. Promotions
Promotion exercise has been completed
for the post of Executive Director, CGMs,
GMs, DGMs and AGMs. The exercise of
svilchover of secrelariaI sla lo ocer cadre
has also been initiated and is in progress.
Tab!c 5.2 Prnmntinn nI 5EBI Omcia!s
No. of
From To persons
promoted
1 2 3
Chief General Executive Director 1
Manager
General Manager Chief General 2
Manager
Deputy General General Manager 4
Manager
Assistant General Deputy General 6
Manager Manager
Manager Assistant General 77
Manager
IV. 5trcngthcning nI Rcginna! Omccs
LocaI Oces of SII vere inauguraled
at Guwahati, Hyderabad, Bhubaneswar,
}aiur and engaIuru. 26 ocers have been
lransferred lo various RegionaI / LocaI Oces
of SEBI during the year.
V. Job Rotation
HRD division undertook the exercise
of job rotation during the year. A total of
222 officers were rotated among different
182
dearlmenls, and regionaI and IocaI oces.
VI. Discip!inary Maucrs
During the year, one staff member
has been placed under suspension in terms
of ReguIalion 74 (1) and 86 (1) (b) of lhe
Securities and Exchange Board of India
(Employees Service) Regulations, 2001.
VII. Training and Development
In order to enhance and widen the
knowledge base and perspective as well as soft
skills including motivation, communication
elc., sla members across aII grades vere
deputed to various behavioural and functional
training programmes both domestic and
international. Several training initiatives were
undertaken during the year to enhance the
skiIIs and eciencies of sla members.
A. DOMESTIC TRAINING
Around 404 SEBI officials attended
various domestic training programmes
at NISM and reputed Institutes like ISB,
IIM, MDI, ASCI, XLRI, IMF, NIT, BSE
Training Inslilule elc. The ociaIs auended
rogrammes on CailaI markel and hnance
related issues like Derivatives and Forex
Risk Management, Credit Default Swaps,
Advanced Deri vati ves, BSE Trai ni ng
Programmes. Training Programmes related
to other diverse areas like Network Security,
Banki ng operati ons and Fi scal Laws
Management, HR related issues, Contract
Labour Management related trainings,
Management Development Programmes for
vomen Ocers, KnovIedge Managemenl,
Advanced Excel, Judiciary etc. were also
auended by SII Ocers. Ocers vere aIso
sent to Conferences and Summits on Mergers
and Acquisitions, Finance, Legal Framework
etc. The major training programmes arranged/
conducted during the year were as follows:
a. Mcdia Training Inr Chairman, Whn!c
Time Members and Executive Directors
Media Training Workshops were
arranged for Chairman, Whole Time
Members and Executive Directors.
b. Leadership & People Management
Programme for Executive Directors and
CGMs
23 senior ociaIs in lhe ranks of ID and
CGM auended an Ixeculive Iducalion
Programme on Leadership & People
Management at the Indian School of
Business, Hyderabad.
c. Leadership for Professional Excellence
programme for GM and DGM level
Omccrs
48 Ocers of DGM and GM IeveI auend-
ed an Executive Education Programme
on Leadership for Professional Excel-
lence at the Management Development
Institute, Gurgaon.
d. Training in Advanced Excel
149 SII Ocers auended a Worksho
on Advanced Excel organized by HRD
division.
e. Workshop on Securities Market
Regulations
A programme on Securities Market
Regulations was held in co-ordination
with the NISM and the Enforcement
Directorate wherein around 20 SEBI
Ocers auended lhe rogramme lo gel
a cross regulatory perspective.
f. Executive Development Program on
Advanced Derivatives
20 SII Ocers auended an Ixeculive
Development Program on Advanced
Derivatives organised in collaboration
with NISM.
183
B. FOREIGN TRAINING
During lhe year, 178 SII OfficiaIs
attended various International Training/
Seminar/ Meeting/ Conference etc.
VIII. Internship
SEBI, as an integral part of its policy,
oers shorl duralion ro|ecls/ inlernshis lo
students of reputed management schools and
Iav schooIs. SII oered inlernshis lo 21
students from such schools during the year.
IX. Extracurricular activities within
SEBI
Self-defense course for women staff,
womens day celebrations, Independence
Day and Republic Day celebrations, Diwali
and Christmas celebrations were organised at
SII Head Oce. Around 350 sla members
auended 'Nadi Iariksha' cam heId al SII
Head Oce. Around 654 eoIe lurned u
for Aadhaar Card cams organised for sla
members and their family members. SEBI also
Iaunched ils in-house magazine 'The Insider'.
X. Prizes won
Ms. Vishakha More, AGM, was recently
felicitated with the National Award in
the Category of Best Employee by the
Ministry of Social Justice and Empowerment,
Government of India.
XI. Initiatives in the realm of corporate
social responsibility
SEBI Shakti , i n associ ati on wi th
Mahatma Gandhi Seva Mandir Blood Bank,
organised a blood donation drive. It received
an overwhelming response from staff
members with about 90 donors voluntarily
giving blood. Visits were made to NGOs like
Sneha Sadan, LiuIe Sislers of lhe Ioor.
XII. Scheme for recogni zi ng and
rewarding academic excellence of
children of employees
During lhe hnanciaI year, 12 chiIdren of
SEBI employees were rewarded for academic
excellence in 10th /12th standards. They were
aIso resenled Cerlihcale of Recognilion by
the Chairman on Republic Day.
5. NATIONAL INSTITUTE OF
SECURITIES MARKETS (NISM)
I. School for Securities Education
(SSE) & School for Securities
Information and Research (SSIR)
In 2012-13, the School for Securities
Education (SSE) continued to strive towards
fulfilling NISMs vision To be a hub of
knowledge initiatives for playing a strategic
role in quality enhancement and capacity
building, for transforming the securities
markels in India and lhe Asia-Iacihc Region.
Activities and initiatives encompassed the
following:
A. Education
In Academic Year 2012-13, the student
slrenglh of SSI louched lhe 85 mark, across
PGPSM (25), PGCSM (20) and CFERM
(31) and CSL (9). The School successfully
concluded Batch II (2011-12) of its One-
year fulltime Post Graduate Programme in
Securities Markets (PGPSM), with 27 out of
28 sludenls |oining lhe securilies markels. In
Batch III (2012-13), 25 students were selected
from an AII-India ooI of 408 candidales.
Campus interviews are in progress, with
over 81 inlervievs being conducled. As
on date, students have found employment
with Darashaw, India Nivesh, HDFC Bank
and LKP Finance, to name a few. NISM has
launched the admission process for the Batch
184
IV. In addition to the NISM Online Admission
Test, the selection basket has been enhanced
by accepting test scores such as GMAT and
XAT. NISM had guest faculty from leading
organisations such as Edelweiss, IndiaFirst
Life, ING, KBC Bank, Prabhudas Liladher,
NSE, and Principal Retirement Advisors
elc. Senior Ocers from SII aIso shared
their expertise. During the year, pedagogical
initiatives included Simulated Trading, Case
Studies from Harvard and other resources,
Reviews of Financial Books and Financial
Films, exposure to Database Software such
as CMIE Prowess, Bloomberg and Statistical
Software such as SAS and WINRATS. The
library added several new titles pertaining to
reguIalion and hnanciaI markels, augmenling
the impressive collection.
NISM Iaunched Cerlihcale in Securilies
Law (CSL) as a part-time programme for
working executives, across 26 Saturdays,
at Nariman Point. NISM had received
recognition as a Research Centre for PhD
studies, by the Symbiosis International
University, Pune and a dialogue has been
initiated with Goa University.
B. Training
A two-day programme on Advanced
Derivatives was conducted for 20 SEBI
ocers. This vas a foIIov-u lo an earIier
programme held in March 2012. NISM
designed and customized the programme,
weaving it with insights from practitioners
from rating agencies, stock exchanges,
br oker age hous es and c ons ul t i ng
organisations. A book by derivatives expert
Prof. Satyajit Das was a part of the course
material. The programme was well received.
SSE provided support for a 5-day
rogramme for ocers from Indian Revenue
Service (IRS). A lolaI of 115 ocers vere
trained on various aspects of securities
markets.
C. Research
Research becomes a crucial ingredient in
inslilulions oering osl graduale educalion
and knowledge dissemination is supported by
knowledge creation. NISMs faculty-members
have been active in Research Papers and Project
Research. To name a few, activities carried out
in Academic Year 2012-13 are as under.
Research papers:
a. Uses and Abuses of Credit Default
Swaps in the Sub-prime Crisis Period
A Critique published in the referred
journal International Research Journal,
'Insurance Markels and Comanies:
Analyses and Actuarial Computations
(ISSN 2078-2454), from Ukraine, Iuroe,
in the June 2012 issue. This was after a
double-blind review process.
b. Published in the International Economics
and Finance Journal (IEFJ), a peer-
reviewed publication, Peking University,
a paper Government Securi ti es
Auctions in India A Study on the
Price Discovery Process, in the July-
December 2012 issue. The publication
is listed in EconLit by the American
Economic Association.
c. Published in the International Economics
and Finance Journal (IEFJ), a peer-
reviewed publication, Peking University,
for their paper Indian Corporate Bond
Market An Issuers Perspective,
in the July-December 2012 issue. The
publication is listed in EconLit by the
American Economic Association
Project Research:
In order lo inuence oIicy and raclice,
185
NISM faculty is engaged in the following
research projects:
a. Completion of Phase II of SEBI Project
Identifying Colluding Groups in
Market, Using Trade Log.
b. Quarterly Performance Review of the
top 100 companies in India (Q1 2012-13).
This is lhe hrsl in a series of conlinuous
studies each quarter.
c. Quality of Disclosures by Merchant
Bankers.
d. The NISM academic team was also
engaged as researchers for the Financial
Sector Legislative Reforms Commission
(FSLRC). NISM and its team-members
have an honorable mention in the Report
of March 2013.
NISM actively engaged with the
securities markets participants by organizing
vari ous conf erences. The 3rd I ndi a
Securitization Summit, a Round Table on
IPOs and a Round Table on Corporate Bonds
were three major events conducted during
the year.
II. School for Investor Education and
Financial Literacy (SIEFL)
The School for Investor Education &
Financial Literacy has been undertaking
two important activities viz. (a) providing
capacity building support to SEBI Financial
Education Resource Persons Programme and
(b) imIemenling hnanciaI Iileracy in schooIs
under the programme Pocket Money.
A. Capacity Building Support to SEBI
Financial Education Resource Person
Programme:
During the year 2012-13, NISM has
aggressively moved to empanel new resource
persons for SEBI Financial Education. Two
rounds of empanelment have been conducted,
one in lhe hrsl haIf of 2012-13 and anolher
in the second half of 2012-13. The strategy
followed during the year was to focus more
on the unrepresented districts in the country,
and as a result, resource persons were
empanelled from the unrepresented districts.
In the first round, empanelment
interview and workshops were conducted at
Navi Mumbai, New
Delhi, Chennai, and Kolkata and 244
Resource Persons were empanelled. In the
second round, the programme was held
at seven centres viz. Bangalore, Patna,
Ahmedabad, Lucknow, Bhubaneswar,
Chandigarh and Guwahati.
B. Implementation of Financial Literacy in
Schools POCKET MONEY Program
NISM has been reaching the students
of various schooIs vilh ils hnanciaI Iileracy
program during the last two years. The
strategy adopted in this regard was training
the teachers and through the teachers
imIemenling il lo benehl lhe sludenls of
schools. During the year 2012-13, 25 teachers
training programmes were conducted
vherein 1180 leachers have been lrained.
A total of 150 schools have been covered
to reach 5072 students. NISM, through
the School for Investor Education and
Financial Literacy (SIEFL), has organised
Financial Literacy Quiz for the schools
in Mumbai. The Quiz programme was
open to the students studying in class IX
and X in any of the recognised schools in
Mumbai. Further, during the year, investor
education programs were held for the
benehl of emIoyees of Rashlriya ChemicaIs
& Fertilizers (RCF) who are about for
superannuation. Four programmes were
held in Mahul Village, Mumbai, where in 155
186
employees participated. The various risks and
rewards were highlighted to the participants
to enable them to make sound investment
decisions.
III. School for Regulatory Studies and
Supervision (SRSS)
The School for Regulatory Studies &
Supervision has organised various programs
during the year 2012-13. Some of them are:
A. Workshop on Crisis Prevention and
Management in Securities Markets
Il vas auended by senior ocers from
the Ministry of Finance, SEBI, Exchanges,
Depositories, Clearing Corporations as
well as academicians. Technical sessions
on Risk Management at Stock Exchanges
and Depositories in India and International
Best Practices, Clearing and Settlement
Systems: Issues and Way Forward and Crisis
Prevention and Management Framework
(CPMF) for Securities Markets were held.
B. Workshop on Advanced Derivatives
The program, organised for SEBI
Ocers, focused on risk managemenl and
control at exchange derivatives.
C. India Investment Conference 2012-13
The CFA Institute in collaboration
with NISM has organised the Third India
Investment Conference. The theme of the
conference was India and the New Financial
Order.
D. Workshop on Securities Market
Regul at i ons An Ant i Money
Laundering Perspective
Forty two officers from Securities
and Exchange Board of India (SEBI) and
Enforcement Directorate (ED) attended
the programme. The topics covered under
various technical sessions were: Securities
Market Introduction to FEMA/PMLA,
Regulatory Environment in Securities Market,
Regulations under FEMA as relevant to
securities market, Foreign Investments by
FIIs/QFIs, AML and KYC Issues, Trading
Practices & Settlement and Offences
under section 12A of SEBI Act A PMLA
Perspective.
IV. 5chnn! Inr Ccrticatinn nI
Intermediaries (SCI)
A. Cerlihcalion of Associaled Iersons in
Securities Markets
NISM launched the following mandatory
cerlihcalion examinalions in lhe hnanciaI year
2012-13. These are:
NISM-Series-I: Currency Derivalives
Cerlihcalion Ixaminalion (Hindi)
NISM-Series-I: Currency Derivalives
Cerlihcalion Ixaminalion (Gu|arali)
NI S M- S e r i e s - I I I - A: S e c ur i l i e s
Intermediaries Compliance (Non-Fund)
Cerlihcalion Ixaminalion
NI SM- Ser i es- V- : Mul uaI Iund
Ioundalion Cerlihcalion Ixaminalion
NISM-Series-VIII: Iquily Derivalives
NISM has also launched the following
voIunlary cerlihcalion examinalions:
NISM-Series-XII: Securilies Markels
Foundation Certification Examination
(Voluntary)
NI SM- Seri es- V- C: Mul uaI Iund
Distributors (Level 2) Certification
Examination (Voluntary)
NISM has also launched the following
certification examinations on a voluntary
187
basis and is awaiting regulatory approval
to make these examinations mandatory for
certain segments/ associated persons of the
securities market:
NISM-Series IX: Merchanl anking
Cerlihcalion Ixaminalion, and
NI SM- Se r i e s - XI : Iqui l y Sa I e s
As a part of its periodic examination
review, NISM launched revised exams for
lhe foIIoving cerlihcalion examinalions in lhe
hnanciaI year 2012-13. These are:
NISM Series-II-: Regislrars lo an Issue
and Share Transfer Agents (Mutual
Iunds) Cerlihcalion Ixaminalion
NI SM Seri es- V- A: Mul uaI Iund
Dislribulors Cerlihcalion Ixaminalion,
and
NISM-Series-VII: Securilies Oeralions
and Risk Management Certification
Examination
NISM is currently developing various
certification examinations for market
inlermediaries vhich are in dierenl slages
of development. These include:
Cerlihcalion Ixaminalion for Inveslmenl
Advisers
Cerlificalion Ixaminalion for SaIes
function across market intermediaries
Ce r l i f i c al i on Ixami nal i on f or
Compliance for Issuers
B. Development & Administration of
Continuing Professional Education
(CPE)
NISM launched the following two-day
CII Irograms for lhe foIIoving cerlihcalion
examinations are available:
1. NISM Series-I: Currency Derivatives
2. NISM Series-II-A: Registrars and
Transfer Agenls (Cororale) Cerlihcalion
Examination
3. NISM Series-II-B: Registrars and Transfer
Agents (Mutual Fund) Certification
Examination
4. NISM Seri es-V-A: Mutual Funds
Dislribulors Cerlihcalion Ixaminalion
5. NI SM- Ser i es- V- B: Mut ual Fund
Ioundalion Cerlihcalion Ixaminalion
6. NISM Series-VI: Depository Operations
7. NISM-Series-VII: Securities Operations
and Risk Management Certification
Examination
NISM is currently developing the
following CPE Programs which are in
dierenl slages of deveIomenl:
1. NI S M- S e r i e s - I I I - A: S e c ur i t i e s
Intermediaries Compliance (Non-Fund)
2. NISM-Series-IV: Interest Rate Derivatives
3. NISM-Series-VIII: Equity Derivatives
During the financial year, NISM
along with CPE Providers conducted 443
CPE programs across different segments
like Mutual Fund Distributors, Currency
Derivatives, Depository Operations, RTA-
Corporate and Mutual Fund Foundation. In
aII 18,081 number of arlicianls auended
CPE Programs.
NISM accredited four CPE Providers
viz Center for Investment Education Pvt.
Ltd., National Stock Exchange of India
Ltd., National Securities Depository Ltd.
and Financial Technology Knowledge
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Management Company in the 1st and 2nd
round of CPE Providers accreditation. NISM
undertook an exercise to increase number
of CPE trainers. Accordingly, 119 new CPE
trainers were added during the year. NISM is
making rogress in oering CII rogrammes
on e- learning platform.
V. Initiatives on Information and
Communication Technology
Maucrs
A. E-learning Department
National Institute of Securities Markets
(NISM) believes that technology enabled
learning can play a valuable role in its
educational, training and literacy initiatives.
Drawing from NISMs existing experience as
trainers of securities markets professionals,
self study courseware is being developed that
can provide high quality, engaging, online
learning experience, covering a wide variety
of topics.
Currently, NISM is developing content for
Mutual Fund Distributors (MFDs) module as
part of our Continuing Professional Education
(CII) inilialive. This viII be deIivered o a
customized Learning management system. This
course will use a combination of text, image,
audio, animation, interactive exercises and
assessments to achieve a learning experience
that takes advantage of opportunities inherent
in online learning.
In future, NISM plans to deliver
E-learning courses, covering wide variety of
topics in the securities markets, as part of its
various initiatives both in the synchronous
and asynchronous mode.
B. Skills Registry
A web based application was developed
and successfully launched on the institutes
website to facilitate the stakeholders in the
cailaI markel using NISM cerlihcalion for
various uroses Iike oering emIoymenl,
permitting business license etc. NISM
introduced the Skills Registry portal wherein
the stakeholders after registration can verify
lhe aulhenlicily of NISM cerlihcales oblained
by candidates after passing examination/
undergoing CPE programme. The application
provides access to the current and past NISM
cerlihcales heId by any candidale.
C. Emai l I nt er f ac e f or Onl i ne
Rcgistratinn, Enrn!!mcnt and Tcsting
System (ORETS)
An email interface was developed and
successfully interfaced with the current
Online Registration, Enrollment and
Testing System (ORETS). This interface
automatically emails workbooks to candidates
enrolled for any certification program. It
also emails certificates to the successful
candidales. The inslilule is making signihcanl
cost savings through this initiative by
eliminating paper based workbooks and
cerlihcales.
D. Patalganga Project
An Agreement to Lease was executed
by NISM with MIDC for Plot No. IS-1 and
IS-2 admeasuring 2,49,686 sq. melers and IIol
No. IS-4 admeasuring 39,005 sq. meters at
Patalganga Industrial area, District Raigad
for construction of NISM campus.
E. NSFE Project
To strengthen and institutionalize
the mechanism for maintaining financial
stability and enhancing inter-regulatory
coordination, an apex-level Financial Stability
and Development Council (FSDC) was set-up
in 2010 by the Government of India.
189
A Technical Group was set up by the
sub-commiuee of ISDC on IinanciaI IncIusion
and Financial Literacy. The technical Group
drafted the National Strategy for Financial
Education (NSFE).
National Centre for Financial Education
(NCFE) under National Institute of Securities
Markets (NISM) has been gi ven the
responsibility of implementing the National
Strategy. The activities envisaged are:
a) Maintenance of Financial Education
website
b) Development of content for all regulators
c) Research
d) Data collection and monitoring of
Financial Education programmes across
the country
6. VIGILANCE CELL
Vigilance Awareness Week for the
year 2012 was observed from October
29 November 03, 2012. The observance
of the week commenced with the pledge
administered by Whole Time Member to
the Executive Directors and Division Chiefs,
who in turn, administered the pledge to their
sla. The RegionaI Manager Iocaled al lhe
four regional offices Northern Regional
Office, Eastern Regional Office, Southern
RegionaI Oce and Weslern RegionaI Oce
administered the pledge to their staff. A
banner on 'VigiIance Avareness Week' vas
prominently displayed outside the office
premises at Mumbai and all four regional
oces during lhe above menlioned veek.
7. PROMOTION OF OFFICIAL
LANGUAGE
In order to ensure the compliance of
ociaI Ianguage oIicy of lhe Governmenl of
India on imIemenlalion of ociaI Ianguage
Hindi in lhe oces of SII, various eorls
were made during the year 2012-13.
I. Bilingualization
During the year, various documents,
viz. aII nolihcalions, regislralion cerlihcales
granted to various market participants,
intermediaries, etc., were issued in both
the languages, i.e. Hindi and English. All
lhe aers vere submiued before various
IarIiamenlary Commiuees in digIol form.
Further, the reports like Annual Report, Audit
Report were also issued in Hindi and English.
II. Rajbhasha Competitions and
Functions
In order lo encourage lhe sla members
for the usage of Hindi in day-to-day
official work, various Hindi competitions
were announced during the year, namely,
Katha Lekhan Pratiyogita, Kavita Lekhan
Pratiyogita, Lekh Pratiyogita, Rajbhasha
Prachar Banner Pratiyogita, Ashubhashan
Pratiyogita, Bolati Tasveer Pratiyogita,
Irashnouari Iraliyogila, Hindi KaryaIayeen
Kaamkaaj Prati yogi ta, Hi ndi Tankan
Pratiyogita, Varg Paheli Pratiyogita, Abhinay
Iraliyogila and Kavila Ialhh Iraliyogila. Sla
members took part in these competitions with
zeal. During the year, Rajbhasha Samaroh
was also organized to honour the winners of
various competitions.
III. Aaj Ka Shabd
To make lhe sla members conversanl
with Hindi vocabulary, one new Hindi word
daily displayed through SEBI Portal.
IV. Hindi Noting and Hindi Quotes
A practice to display one phrase,
generally used in Hindi Noting, and one
190
Hindi Quote daily through SEBI portal for
sla members of SII, inilialed during 2011-
12, has been continued.
V. Rajbhasha Meetings and Seminars
In order to ensure compliance and
imIemenlalion of lhe ociaI Ianguage oIicy
of lhe Governmenl of India in lhe oces of
lhe oard, meelings of lhe OciaI Language
ImIemenlalion Commiuee vere conducled.
Accordingly, during the year 2012-13, various
crucial decisions were taken with regard
lo lhe usage of Hindi in day-lo-day ociaI
work, and follow-up actions were taken to
ensure the implementation of these decisions.
In addilion, ociaIs of lhe oard aIso look
part in the Rajbhasha Seminars organized by
other institutions.
VI. Hindi Magazine
With a view to publish the contributions
of the winners of Hindi Competitions and to
encourage lhe sla members of SII, a seciaI
issue of Hindi Magazine (Viniyamika) of
SEBI was published during the year.
VII. Information Technology and Hindi
In order to provide the facility to work
in Hindi more conveniently, advanced multi-
lingual software having Unicode facility was
made available on all the computers.
VIII. Investor Website and SCORES
Efforts are in progress to make the
investor website available in Hindi and
also to ensure bilingualization of SEBI
Complaints Redress System (SCORES), so as
to make available the investor website and the
SCORES for investors in their language.
IX. Rcginna! Omccs
Iorls are being made in lhe regionaI
offices towards compliance of the official
language policy of the Government of
India, which includes meetings of the
OciaI Language ImIemenlalion Commiuee,
biIinguaIizalion, reIy in Hindi lo lhe Ieuers
received in Hindi, correspondence in Hindi,
etc. Thus, during the year, besides compliance
of lhe ociaI Ianguage oIicy in lhe regionaI
oces, aII ossibIe eorls vere conlinued lo
be made towards the use of Hindi in day-to-
day ociaI vork.
8. INFORMATION TECHNOLOGY
The major Information Technology
( I T) i ni t i at i ves dur i ng 2012- 2013
include strengthening of IT Security,
implementation of new Webmail system
with the complete Disaster Recovery (DR)
features, implementation of two factor
authentication system for secured access to
SII aIicalions, scanning of cIosed hIes
as part of Document Management System
(DMS), etc.
I. Strengthening of IT security
The existing organisational IT security is
reviewed extensively and the following major
steps were taken to strengthen the IT security:
a) Conducted network vulnerability
assessment and penetration test
b) Enterprise network architecture was
redesigned to include Firewall, Routers,
Virtual Private Network (VPN) solution,
Secured access to application through
two factor authentication
II. Implementation of New Webmail
System
The new Webmail system was deployed
in High availability mode with complete DR
Failover capabilities. The new email systems
not only secure but also provide seamless
access to corporate email system from
191
anywhere, any device. The important features
of the project include:
ImIemenlalion of ImaiI securily device
lo hIler virus, sam and Ihishing ImaiIs
ImIemenlalion of ImaiI Incrylion
feature to send encrypted emails
ArchivaI of aII incoming and oulgoing
emails for compliance
Inslanl synchronizalion of maiI dala vilh
the DR servers
III. Implementation of two factor
authentication for secured access to
SEBI Web applications
To enhance the security of the internet
facing web applications and to mitigate
the online security threats, the 2-Factor
authentication system is deployed. Users,
apart from the regular user id / password,
need to provide the two factor authentication
code (which is a combination of 4 digit pin
number and 6 digit randomly generated
token code of the physical hardware token).
This system was deployed both at Primary
site, Mumbai and DR site, Chennai.
IV. Internet Connectivity to DR site
Chennai
To enable DR Failovers and seamless
connectivity to SEBI applications from the
Internet new leased line internet connectivity
was provisioned in the DR site Chennai.
V. 5cuing up nI ncw IT InIrastructurc
at 5EBI Lnca! nmccs
IT Infrastructure was set-up at SEBI
LocaI oces al Guvahali, Lucknov, Indore,
Hyderabad and SII oce al MiuaI Courl
including leased line connectivity.
VI. Enterprise Wide Portal
During the year, Information Technology
Department embarked on integration of
various application systems implemented in
SEBI. The prime motivation for this activity
was to develop a framework for integrating
information, people and processes across
the organisation. To meet this objective,
specifications for the development of
Enterprise Wide Portal (EWP) were designed.
The planned solution architecture for SEBIs
EWP is highly scalable and performance
driven and will ensure rapid deployment and
integration of future systems. The EWP is
planned to be web driven with multi-channel
suorl vilh a secured and unihed access
policy. The EWP is designed to harness the
portlet based technology for aggregation
and personalization of information across
distributed applications in SEBI.
9. INTERNATIONAL CO-
OPERATION
During 2012-2013 SEBI played a vital
role in the international arena through
meaningful and significant contributions
towards its avowed objectives of promoting
fairness, transparency and efficiency of
securities markets. SEBI participated and
conlribuled in an eeclive manner lovards
myriad activities of the standard setting
bodies, both at the regional and international
level. Being an active and committed
member of the International Organisation of
Securities Commissions (IOSCO), the globally
recognized inlernalionaI slandard seuer for
securities markets, SEBI had the opportunity
to take up several critical and challenging
leadership roles in the past year, further
helping SEBI to consolidate its image as a
Ieading and eeclive member of lhe gIobaI
securities market community.
SEBI also actively engaged in co-
operation on investigation / enforcement/
192
supervisory matters with other overseas
regulators under the framework of mutual
collaboration provided under the IOSCO
Multilateral Memorandum of Understanding
(MMoU) and several bilateral MoUs. Its
engagement with the IOSCO apart, SEBI
continued to make a meaningful contribution
as a member of the leading international
bodies and forum, such as the Financial
Stability Board (FSB)- the international
body that has been mandated by the G20 to
romole imIemenlalion of hnanciaI seclor
regulatory reforms in the world, and the
Joint Forum (JF), a cooperative cross-sector
group established in 1996 to deal with issues
common to the banking, securities and
insurance sectors, including the regulation of
hnanciaI congIomerales.
As a part of i t s ot her varyi ng
commitments as the securities market
regulator, SEBI on several occasions, provided
inputs to the Government of India on
inlernalionaI issues/ lrealies and hnanciaI
sector dialogues, supported programmes on
technical assistance to developing countries,
hosted and organized visits of foreign
delegates, international seminars and training
programs.
I. Association with IOSCO
The IOSCO Board, the governing
body of the IOSCO, is made up of 32
securities market regulator and SEBI is one
of the members of the IOSCO Board. SEBI
participates in the various work streams
of IOSCO and makes contributions to the
policy decisions on the different issues
pertaining to the securities market. SEBI has
its representations in 5 out of the 7 policy
committees of IOSCO. SEBI endeavors to
implement the recommendations made by
IOSCO through its reports.
SEBI is a member of the IOSCOs
Imerging Markels Commiuee (IMC). The
emerging markels commiuee aims lo ensure
the exchange of information and to promote
the efficiency and development of the
emerging securities markets.
A. Chair of the Asia- Pacific Regional
Cnmmiucc
Chairman SEBI, Shri U. K. Sinha was elected
as Chair of lhe IOSCO Asia- Iacihc RegionaI
Commiuee (AIRC) in ils meeling heId in
Beijing, China during May 2012.
AIRC is one of four regionaI commiuees
constituted by the IOSCO to focus on regional
issues relating to securities regulation. The
APRC comprises 25 members representing
securities market regulators from the Asia-
Iacihc |urisdiclions.
During the year, APRC met twice under
the Chairmanship of Shri U.K. Sinha. The
first meeting was held in Beijing in May
2012, as part of the IOSCO annual conference.
The second meeting took place in Bangkok,
ThaiIand during November 28-30, 2012.
The three day APRC event aimed at further
enhancing mutual cooperation and exchange
of information among regulators of one of
the fastest growing regions of the world. The
event also highlighted the important role
being played by the regulators of the region
in shaping the global policy framework for
securities markets and the need to continue
lhe eorls in lhis direclion.
As APRC Chair, SEBI has brought
dynamism and a sense of mutual camaraderie
into the working of APRC through various
initiatives. A few such initiatives are as follows:
a. An industry roundtable for frank and
constructive exchange of ideas among
193
private sector and regulators of the
region. The topic of the roundtable
held on November 29, 2012 was
identifying and addressing emerging
risks in the securities market in the APRC
region; particularly in the context of global
!ctc|cpncni in inc nancia| narkcis. The
roundtable highlighted the importance
of building, nurturing and strengthening
investors trust and confidence by
addressing the emerging risks in a
consistent, prudent, timely and a well-
nuanced manner. It also underscored
the importance of consistency and
predictability in regulatory rule making
and implementation across jurisdictions
and regi ons. The i mportance of
appropriate regulatory response in the
face of possible risk of contagion for
lhe Asia-Iacihc region due lo decIine
in growth rates world over was also
highlighted.
b. Scheduling an Enforcement Directors
meeting as part of APRC event, with a
view to promote mutual cooperation
and share information and insights about
enforcement practices and experiences of
regulators of the region. This has been
well received by members of the APRC
jurisdictions.
c. Development of a central enforcement
database for sharing of information
on the enforcement actions among
regulators of the APRC region.
d. Publication of a quarterly APRC Digest,
for information sharing on recent
trends and regulatory developments
in securities market in the region. The
objective of the digest is to encapsulate
Cnairnan, S|B| Cnairing inc AP|C ccnjcrcncc ai Tnai|an!, Nctcn|cr 2012
194
such regional information at one place,
for information and easy reference. Two
volumes of the APRC Digest have been
released during the year.
e. Public seminar on thematic issues
rel evant f or t he APRC member
jurisdictions. Two public panels on a)
Opportunities and challenges for SME
hnancing lhrough cailaI markel and
b) capitalizing on Regional Growth
Prospects: Enlarging Opportunities for
Asset Management Companies took
place as part of the APRC meeting in
Thailand, during November 2012.
f. Promoting greater connect among
regulators of the region. Highlighting
common issues and concerns relating
to APRC member jurisdictions to other
international bodies.
B. Asscssmcnt Cnmmiucc
SEBI plays a leadership role in the
IOSCO's Assessmenl Commiuee (AC) and
is currenlIy lhe vice-chair of lhis commiuee.
The AC has been formed in February 2012
to drive IOSCOs key strategic goal of being
lhe recognized slandard seuer for securilies
regulation. The main objectives of AC are to
identify and assess implementation of IOSCO
Principles and Standards and to promote the
fuII, eeclive and consislenl imIemenlalion
of IOSCO Principles and Standards across the
IOSCO membership. The main responsibilities
of AC are (a) To conduct Thematic Reviews
of particular IOSCO Principles and IOSCO
Standards across IOSCOs membership; (b)
To conduct Country Reviews and it involves
reviewing Self Assessments prepared by
IOSCO Members about the implementation
Oc|cgaics ai inc AP|C Ccnjcrcncc, Bangkck, 2012
195
of IOSCO Principles; and (c) To maintain and
periodically update the IOSCO Principles and
related Methodology.
The AC's hrsl lhemalic reviev of AC is
on the Implementation of Principles 6 and 7:
Principle 6: The Regulator should have or
contribute to a process to monitor, mitigate
and manage systemic risk, appropriate to its
mandate.
Princip|c 7. The Regulator should have
or contribute to a process to review the
perimeter of regulation regularly.
SEBI along with 33 other members
have participated in this thematic review.
This Review is an opportunity for IOSCO
and members participating in the Review
to show progress in implementing these
Principles, share experiences of other
members jurisdictions in implementation
and identify and assess whether further
guidance is needed from IOSCO to support
implementation. Further, SEBI also has its
representation as one of its members in the
Review Team, which is carrying out this
review.
SEBI plays an important leadership
role in the various activities of AC such as
coordination with the member jurisdictions
on their participation for the Country Review
Program, developing strategies for AC and its
implementations etc.
C. Emcrging Markct Cnmmiucc
Emerging Markets Committee (EMC)
of IOSCO comrises 86 members vhich
Cnairnan, S|B| |cing jc|iciiaic! |q Or. Vcrapc| Sccaiiqanurak, Sccrciarq Gcncra|, Sccuriiics an!
|xcnangc Ccnnissicn, Tnai|an! ai Bangkck, Tnai|an!
196
conslilule more lhan 80 ercenl of IOSCO's
ordinary membership. The EMC members
also represent the worlds fastest growing
economies and include 10 of the G-20
members. In the near term it is expected
that the number of IOSCO members that are
emerging economies will increase as new
members join. SEBI is a member of EMC
IOSCO. During 2012-13, SEBI responded to
various surveys of EMC-IOSCO including
surveys on Financing of SMEs through the
Capital Markets, 5th Annual Survey by the
EMC Chairmans Task Force and IOSCO-
World Bank Joint Mutual Fund Industry
Development Survey.
II. Association with G20 / FSB
The Financial Stability Board (FSB) is
an international body established to address
hnanciaI syslem vuInerabiIilies and lo drive
the development and implementation of
strong regulatory, supervisory and other
oIicies in lhe inleresl of hnanciaI slabiIily.
One of the main mandates of the FSB is to
implement G20 Policy announcements on
hnanciaI reguIalion.
SEBI is a member of the Plenary and
Regional Committee Group- RCG (Asia)
of the FSB. During 2012-13, FSB Plenary
met three times and the FSB RCG Asia met
once. SEBI provides comments to the MoF
on various FSB issues since the MoF is the
principal country member to the FSB from
India. SEBI is also a member of Indian
Working Group formed by Ministry of
Finance on G20. Further, SEBI also provides
comments to the IOSCO on FSB mandates.
Since lhe onsel of lhe gIobaI hnanciaI
crisis, the G20 has established core elements
of a new global financial regulatory
framework that will make the financial
syslem more resiIienl and beuer abIe lo serve
the needs of the real economy. National
authorities and international bodies, with
the Financial Stability Board (FSB) as a
central locus of coordination, have further
advanced lhis hnanciaI reform rogramme,
based on clear principles and timetables
for implementation. Major international
policy reforms of FSB have now globally
been agreed, to address risks and strengthen
reguIalion across lhe hnanciaI seclor.
FSB adopt s, i nt er-al i a, survey /
questionnaire methodologies in order to obtain
inputs for recommending policies, ascertaining
the feedback and status of the recommended
policies. During 2012-13, FSB conducted
various surveys/questionnaire including
on Client Assets Protection and Resolution
Regime Peer Review. SEBI provided responses
to these surveys/questionnaires.
III. Joint Forum
Following the decision of the Joint
Forum Coordination Group, in February,
2012, SEBI became a new member of the
Joint Forum (JF), a cooperative cross-sector
group which was established in 1996 by its
lhree arenl bodies- lhe aseI Commiuee on
Banking Supervision (BCBS), the International
Organization of Securities Commissions
(IOSCO) and the International Association
of Insurance Supervisors (IAIS), to deal with
issues common to the banking, securities and
insurance sectors, including the regulation of
hnanciaI congIomerales.
SEBI was nominated by the IOSCO as
lhe hrsl ranked |urisdiclion for membershi
of the JF.
IV. Bilateral Engagements
Along with its engagements at the
multilateral levels, SEBI has also entered
into bilateral MoUs with a cross-section of
197
jurisdictions. Such bilateral agreements, while
further strengthening and consolidating the
existing communication channels, pave the
way for enhanced mutual cooperation in
resecl of a variely of mauers erlaining lo
supervision, investigation, enforcement and
technical assistance in the securities markets.
Until March 2012, SEBI had entered into
18 biIaleraI MoUs/TechnicaI CoIIaboralion
Agreement and one Letter of Intent with
various overseas jurisdictions for mutual
assistance and information sharing. With
a view to further strengthen cross border
cooeralion in mauers erlaining lo securilies
Iavs, SII in lhe Iasl hnanciaI year conlinued
to explore avenues of bilateral association
with several other countries.
V. Ministry References- Contribution
to various International Treaties
and Dialogues
The ever increasing globalization and
inlerconnecledness of hnanciaI markels caIIs
for newer and dynamic levels of regulatory
co-operation at varying stages. Towards this
objective, SEBI along with the Government of
India and other regulatory bodies, was seen
to make its own set of contributions.
During the year, SEBI continued to
conlribule lovards an eeclive and usefuI
engagement with the Government of India as
regards various international treaties, under
consideration by the GoI for areas related to
the securities markets.
In this direction, SEBI participated and/
or provided its inputs on various issues,
agenda items and topics relating to the
securities markets, at a number of bilateral
dialogues thorough the year. A few such
treaties and dialogues include the Indo-
US Working Group Meeting held on Oct
9, 2012 and followed by India-Australia
FTA Negotiations, India-EU Broad-based
Trade and Investment Agreement, India-
Canada Comprehensive Economic Partnership
Agreement, 2013 and the US-India Regulatory
Dialogue, SEBI provided inputs to overseas
regulatory agencies on a host of securities
markets issues of interest and/or relevance,
incIuding lhe 'QuaIified Ioreign Inveslor
Regime, implications of foreign laws on
Indian investments and intermediaries and
other such policy oriented issues.
VI. Participation in International
Programs
SEBI officials have been invited to
participate as Speakers/Panelists at many
accredited international seminars and
conferences. During 2012-13, SEBI nominated
ils ociaIs as Seakers /IaneIisl in overseas
training programs/ conferences/ seminars
held by international bodies such as APEC
FRTI, MAS Singapore, CMA Kuwait, ADB,
programs conducted by other overseas
regulators and bodies etc. The purpose to
nominale SII ociaIs lo lhese rograms is
to share their expertise at renowned forums
and to further strengthen the global image of
SEBI as reliable source of knowledge and its
competent human resources.
VII. MMoU and MoU Requests
As a crucial part of its commitment
t owa r ds t he I OSCO Mul t i l a t e r a l
Memorandum of Understanding (MMoU),
to which SEBI has been a signatory since
April 2003, SEBI continuously strives to
provide cooperation and facilitate exchange
of information with its counterparts in other
jurisdictions.
During the year, SEBI received a total
198
of 37 requests for information from the
overseas securities regulators seeking SEBIs
assistance under the aegis of the IOSCO
MMoU or the respective bilateral MoUs.
SEBI addressed and executed such requests,
subject to the provisions of the MMoU/MoU.
Similarly, nine such requests were made by
SEBI to the respective regulatory bodies of
other countries.
VIII. Foreign Delegations / Dignitaries
to SEBI
To promote mutual collaboration
and establish deeper levels of regulatory
cooperation, and to facilitate a better
understanding of the Indian securities
markets, SEBI played host to a number of
important dignitaries and delegations of
overseas regulatory bodies / agencies.
The authorities from which delegations
visited SEBI during the year include the
Ministry of Finance, Govt. of Japan; US
Department of Treasury; CMA, Saudi Arabia;
SC Malaysia; Govt. of Luxembourg; GIZ and
ahn, Germany, among olhers.
IX. Study tours for Overseas
Regulators
SEBI facilitated four study tours during
the year, on requests made by BSE Training
Institute Ltd., BSE Brokers Forum, etc., for
study visits for delegations representing
various overseas |urisdiclions auending lheir
International programs on Securities Markets.
The increasing requests for conducting
sludy lours for overseas deIegales signihes
India s growing importance amongst
other jurisdictions for its robust regulatory
framework and market practices.
10. PARLIAMENT QUESTIONS
The Parliament Cell of SEBI is the nodal
and interface point which coordinates with
the various Departments in Government
particularly Ministry of Finance and
Minislry of Cororale Aairs. Work reIaling
to Parliament Questions, Assurances to
Parliament Questions, References from
Honourable Members of Parliament (VIP
references), General references received
through Ministries and other related activities
are auended by lhe IarIiamenl CeII .
SEBI furnished information and replies in
a time-bound manner to 216 Parliament
Questions and 60 points/queries raised by the
IarIiamenlary Commiuees as under:
Duri ng the fi nanci al year 2012-
13, various references, representations,
complaints and news articles were received
lhrough Irime Minisler's Oce, HonourabIe
Members of Parliament (VIPs), Ministries
including Ministry of Finance for action/
comments. SEBIs endeavour has been to
furnish replies to Parliament Questions, VIP
references and other queries in a time bound
manner.
Table 5.3: Parliament Queries received/
raised
2012-13 2011-12
1
2 3
No. of Parliament
Questions received 216 139
No. of points/ queries
raised by Parliamentary
Commiuees 60 94
SEBI representatives attended the
meeting of the Standing Committee on
Finance on February 13, 2013. The topic of
discussion was Overall Performance of
SEBI with particular emphasis on recent
measures taken and proposed to strengthen
the regulatory mechanism. The details of
199
Whole Time Member, SEBI is the present
Appellate Authority. As per the direction of
the Central Information Commission (CIC),
SEBI has also designated the Transparency
Officer and Shri P. K. Nagpal, Executive
Director, SEBI, is the present Transparency
Ocer.
Section 4 of the RTI Act casts obligation
on every Public Authority to make certain
proacti ve di scl osure. SEBI has been
proactively making such disclosure and
fuIhIIing ils obIigalion under lhe SII Acl
as well as RTI Act. Since its formation, SEBI
always believes in adequate disclosure of
the information in the interest of Securities
market and the investor. The focus of
the disclosure is transparency and better
understanding of the functioning of the
queries/ oinls raised by various Commiuees/
Ministry of Finance and replied by SEBI
during 2012-13 are as under:
11. RIGHT TO INFORMATION ACT
SEBI has been implementing the Right
to Information Act, 2005 (RTI Act) in its
true spirit since its enactment in the year
2005. As per the provisions of the RTI
Act, SEBI has designated a Central Public
Information Officer (CPIO) at its Head
Oce in Mumbai. Dr. AniI Kumar Sharma
is the present CPIO of the SEBI. In order
lo rocess lhe RTI aIicalion in ecienl
manner and keeping the convenience of the
information seeker, SEBI has also appointed
four Central Assistant Public Information
Ocer (CAIIO) al ils reseclive RegionaI
Oces Iocaled al DeIhi, Chennai, KoIkala
and Ahmedabad. The role of CAPIOs is
to receive the applications for information
or appeals under the provisions of the RTI
Act and forward them to CPIO. SEBI has
aIso designaled an OciaI as lhe AeIIale
Authority (AA) where appeal can be made
against the Order of the CPIO. Shri S Raman,
Table 5.4: Session-wise Parliament Queries
received and replied by SEBI
during 2012-13
Nn. nI Admiucd
Parliament Session Questions Questions
received
1 2 3
Monsoon Session (August
Selember 2012) 80 57
Winter Session (November
December 2012) 81 58
Budget Session (February
May, 2013) 55 *** 33
Total 216 148
inc|u!ing 1 nciicc
** including 5 notices
nc. cj qucsiicns rcccitc! ii|| Marcn 31, 2013
Table 5.5: Details on appearance of SEBI
representatives before various
Cnmmiuccs
Queries/
5r. Cnmmiucc Pnints
No. Raised
1 2 3
1. Slanding Commiuee of Iinance
on selection of subjects for
examination during the year
2012-13 Background Note on
performance of SEBI - mechanism
for protection of Investors Rights
and Interests in the Capital Market 0
2. Slanding Commiuee on Informalion
Technology Issues related to Paid
News (January 2013) 1
3 List of points raised during the
meeling of Slanding Commiuee on
Finance - Overall Performance of
SEBI with particular emphasis on
recent measures taken and proposed
to strengthen the regulatory
mechanism February 2013 32
4 Third Sub-Commiuee of lhe
Commiuee of IarIiamenl on
OciaI Language Iebruary 2013 0
200
Regulator and SEBI registered intermediaries
and other market participants.
SEBI has been proactively disclosing
lots of information about various aspects of
securities market including various activities
and policy of the SEBI on its website i.e.
www.sebi.gov.in. Also, Frequently Asked
Questions (FAQs) have been uploaded on
the SEBI website pertaining to different
departments / areas to help the investors
understand the procedures and terminologies
of the securities market. SEBI has provided
SEBI Act, 1992 and other Acts as well as
various Rules, Regulations. Circulars and
guidelines issued there under on its website
under the head Legal Framework. Further,
all the Orders passed by SEBI, orders of
Securities Appellate Tribunal (SAT) as well
as orders of SEBI Appellate Authority are
available on the SEBI website.
SEBI has also been taking various
steps for ensuring the transparency in the
functioning of the exchanges and other
market participants. In order to provide a
IeveI Iaying heId for lhe inveslors and lhe
market participants and for the development
of the markets, it has been SEBIs endeavor to
promote transparency in its decision making.
SEBIs focus has been on disseminating
up-to-date information to the investors /
market through various investor education
and investor awareness programs. SEBI has
through its various Regulations, such as
the ICDR Regulations ensured providing
maximum disclosure to the investing public
in order to take well informed investment
decisions. The Insider Trading Regulations
and Takeovers Regulations provide the
senior officials / major shareholders of
companies to disclose their holdings on
a regular basis. Further, even though the
provisions of RTI Act are not applicable
to the non-public entities, viz. Exchanges /
market intermediaries, the disclosure policy
of SEBI requires these entities to disclose
on their respective websites and otherwise,
important details and updated information
on the material developments and day-to-day
operations including details of redressal of
investor grievances.
In respect of RTI applications received
by SEBI which are in the nature of complaints
/ seeking redressaI of comIainls, lhe oce
of CPIO voluntary provides guidance to the
information seeker. SEBI endeavors for proper
and timely redressal of investor complaints
for which separate designated website for the
investor viz. hup://invcstnr.scbi.gnv.in has
been set up. Recent measures taken in this
regard include launching of SCORES (SEBI
Complaints Redress System), a web-based,
centralized grievance redress system for the
investors of the securities market where an
investor can make complaint / grievances
in electronic mode on the SCORES website
(www.scores.gov.in) with facility for online
tracking of his complaint status.
SEBI has endeavoured to provide the
disclosable information within the stipulated
time and there is not even a single case of
delay, although the information sought,
many times, is voluminous and contain
large number of issues pertaining to various
departments of SEBI in a single application.
Wherever felt appropriate, SEBI has provided
additional information / guidance voluntarily
to the information seeker about the securities
market.
The details of RTI applications and First
Appeal to SEBI Appellate Authority during
2011-12 and 2012-13 are given as under:
201
The details of Appeal before Central
Information Commission (CIC) during 2011-
12 and 2012-13 are given as under:
Table 5.6: RTI applications and First Appeal
to SEBI Appellate Authority
1 2 3
No. of applications
received 1,157 975
Total no. of issues raised
in aIicalions 4,468 4,152
No. of appeals received
by the Appellate
Authority in SEBI 294 216
No. of orders passed by
the Appellate Authority
in SEBI 304 225
No. of appeals rejected /
dismissed by the Appellate
Aulhorily in SII 227 168
No. of appeals allowed 76 57
Table 5.7: Appeal before Central
Information Commission
1 2 3
No. of appeals received
by CIC 24* 74*
No. of appeals rejected /
dismissed by CIC 7 31
No. of appeals with
directions by CIC to
furnish part of information/
to reconsider providing
addilionaI informalion 8 43
* on the basis of Appeal Memo/hearing notice received
from CIC/Appellant.
During the year 2012-13 also, the
Board took various initiatives to maintain
transparency in its functions, including
disclosure of the information on a regular
basis. The Board has also taken various
initiatives /measures for investor education
and protection of the interest of investors
of the securities market. These initiatives/
measures also helped in achievement of the
objectives of the RTI Act.
202
Date Announcements
Contd.
CHRONOLOGY OF MAJOR POLICY INITIATIVES BY SEBI
AriI 13, 2012 To faciIilale lhe onIine movemenl of comIainls in SII ComIainls
Redress Syslem (SCORIS), comanies desirous of geuing lheir
equily shares Iisled on lhe slock exchanges vere mandaled lo
oblain aulhenlicalion on SCORIS, before Iisling arovaI is
granled by slock exchange.
To mainlain lhe markel inlegrily as veII as lhe conhdence of
inveslors, broad guideIines on usiness Conlinuily IIan (CI) and
Disasler Recovery Sile (DRS) vere inlroduced.
AriI 16, 2012 Comanies vhich aIy lo lhe slock exchanges for Iisling of debl
securilies vere mandaled lo aIy for aulhenlicalion for SCORIS
vhen lhey hIe for arovaI for Iisling of debl securilies.
Iormals for inlerim discIosure of financiaI resuIls by Iisled
comanies vere amended.
AriI 27, 2012 CircuIar on auclion caIendar for aIIocalion of III debl Iimil issued.
May 03, 2012 RegionaI Oces of SII vere emovered lo rocess drafl oer
documenls in resecl of issues of size u lo ` 500 crores.
May 12, 2012 Modihed circuIar on Consenl and Comounding issued.
May 14, 2012 In order lo slrenglhen comIiance mechanism, eriodic reorling
formal of merchanl bankers vas revieved.
May 23, 2012 Iosilion Limils for lrading member (banks) in exchange lraded
USD:INR derivalive conlracls vere revised
May 25, 2012 On lhe basis of lhe exerience gained and vilh lhe urose of
roviding more cIarily on ils scoe and aIicabiIily, SII arliaIIy
modihed lhe consenl circuIar daled 20lh AriI 2007.
May 30, 2012 Ixil oIicy for de-recognized/non-oeralionaI slock exchanges vas
revieved.
}une 07, 2012 On a reviev and in consuIlalion vilh lhe Governmenl of India
(GoI) and RI, framevork for QuaIihed Ioreign Inveslor (QII)
inveslmenl in equily shares and muluaI fund schemes vas revised.
Revision of reorling limeIines of Oshore Derivalive Inslrumenls
(ODIs)/ Iarlicialory Noles (INs) aclivily.
}une 15, 2012 SII decided lo redress comIainls againsl slock exchanges (SIs)
and deosilories lhrough SCORIS and lhey vere advised lo viev
lhe ending comIainls al hu://scores.gov.in/admin and submil
lhe Aclion Taken Reorl (ATR) aIong vilh suorling documenls
eIeclronicaIIy in SCORIS.
}une 26, 2012 III Inveslmenl in governmenl debl Iong lerm and cororale debl Iong
lerm infra calegory vere enhanced.
203
Chronology of Major Initiatives by SEBI
Date Announcements
Contd.
}uIy 05, 2012 Wilh a viev lo exedile lhe lransfer rocess in lhe inleresl of lhe
inveslors, il vas decided lo reduce lhe lime-Iine for regislering lhe
lransfer of equily shares and debl securilies lo 15 days from one
monlh.
}uIy 13, 2012 IaciIily of e-voling by sharehoIders enabIed
}uIy 18, 2012 Comrehensive guideIines on Oer for SaIe (OIS) of shares by
romolers lhrough lhe slock exchange mechanism vere revised.
In consuIlalion vilh lhe Governmenl of India (GoI) and RI, SII
decided lo aIIov QIIs lo invesl in Indian cororale debl securilies
and debl schemes of Indian muluaI funds.
}uIy 20, 2012 Amendmenl lo dehnilion of QuaIihed Ioreign Inveslor (QII) and QII
inveslmenl in debl muluaI fund schemes vhich invesl in infraslruclure
}uIy 23, 2012 In order lo imrove markel inlegrily, SII, in consuIlalion vilh
slock exchanges, revised lhe eIigibiIily and exil crileria for slocks in
derivalives segmenl.
}uIy 25, 2012 The slruclure, design, formal, conlenls and organisalion of informalion
in lhe aIicalion form and abridged roseclus have been
slandardised and made uniform for ubIic issues of debl securilies.
}uIy 27, 2012 Measures vere laken lo faciIilale a syslem for making onIine
aIicalions reduce lhe limeIines of lhe issue rocess for ubIic issue
of debl securilies.
Augusl 02, 2012 GuideIines on Direcl Markel Access (DMA) vere modihed.
Augusl 13, 2012 IncIusion of usiness ResonsibiIily Reorl in AnnuaI Reorls
rescribed.
Aadhaar Leuer issued by Unique Idenlihcalion Aulhorily of India
(UIDAI) ermissibIe as Iroof of Address for Knov Your CIienl
(KYC) norms.
Syslem devised lo rocess quaIihed annuaI audil reorls hIed by
lhe Iisled comanies vilh slock exchanges.
Augusl 24, 2012 SII (Issue of CailaI and DiscIosure Requiremenls), ICDR ReguIalions,
2009 amended as foIIovs:
Iromolers/romoler grous vere aIIoved lo oer lheir shares
lhrough InslilulionaI IIacemenl Irogramme (III) or OIS vilh a
ga of minimum lvo veeks belveen lhe successive OIS and / or
III.
ReIaxalions as lo minimum ubIic sharehoIding and minimum
subscrilion requiremenls in resecl of Infraslruclure comanies/
seclor vilhdravn.
204
Date Announcements
Contd.
Augusl 27, 2012 RalionaIisalion of rocess reIaling lo surrender of regislralion by
sub-brokers.
Wilh a viev lo achieve vider hnanciaI incIusion, encourage hoIding
of demal accounls and lo reduce lhe cosl of mainlaining securilies
in demal accounls for relaiI individuaI inveslors, deosilory
arlicianls (DIs) vere advised lo make avaiIabIe a asic Services
Demal Accounl (SDA) from Oclober 01, 2012.
Augusl 28, 2012 IarliaI lvo-vay fungibiIily of Indian Deosilory Receils (IDRs)
aIIoved. DelaiIed guideIines for lhe same rescribed on March 01,
2013.
Augusl 29, 2012 AddilionaI melhods of righls issue / bonus issue vilh romolers
forgoing lheir enlilIemenls and lhe rovision for any olher melhod on
case lo case basis, inlroduced for heIing comanies achieve minimum
ubIic sharehoIding requiremenls.
Selember 13, 2012 SeIf Cerlihed Syndicale anks (SCSs) vere advised lo ensure lhal
aIicalions using AIicalion Suorled by Iocked Amounl
(ASA) faciIily shaII onIy be againsl/in a funded deosil accounl
and cIear demarcaled funds are avaiIabIe for ASA aIicalions.
GuideIines issued on various asecls reIaled lo muluaI funds/AMCs
as beIov:
i. IungibiIily of TolaI Ixense Ralio (TIR) vas enabIed by
removaI of lhe sub-Iimils on inveslmenl managemenl and
advisory fees vilhin lhe TIR.
ii. MuluaI Iunds/AMCs shaII Iaunch schemes under a singIe Ian
and ensure lhal aII nev inveslors are sub|ecl lo singIe exense
slruclure.
iii. MuluaI Iunds/AMCs shaII rovide a searale Ian for direcl
inveslmenls, i.e., inveslmenls nol rouled lhrough a dislribulor,
in exisling as veII as nev schemes.
iv. A nev cadre of dislribulors, such as oslaI agenls, relired
governmenl and semi-governmenl ociaIs, relired leachers
and bank ocers and olher simiIar ersons (such as bank
corresondenls) as may be nolihed by AMII/AMC from
lime lo lime, shaII be aIIoved lo seII unils of simIe and
erforming muluaI fund schemes.
v. MuluaI Iunds/AMCs shaII annuaIIy sel aarl al Ieasl 2 basis
oinls on daiIy nel assels vilhin lhe maximum Iimil of TolaI
Ixense Ralio (TIR) for inveslor educalion and avareness
inilialives.
205
Date Announcements
Contd.
vi. MuluaI Iunds/AMCs shaII make haIf yearIy discIosures of
lheir unaudiled hnanciaI resuIls on lheir reseclive vebsile
in a user-friendIy and dovnIoadabIe formal.
vii. Ixil Load charged, if any, vouId be crediled lo lhe scheme.
Selember 21, 2012 Irocessing of Inveslor comIainls againsl KRA KYC (Knov Your
CIienl) Regislralion Agency in SCORIS and sending comIainls
erlaining lo KRAs eIeclronicaIIy lhrough SCORIS al hu://scores.gov.
in/Admin.
Selember 25, 2012 SeIf Cerlihed Syndicale anks (SCSs) mandaled lo rovide ASA
faciIily in aII lheir branches.
Selember 26, 2012 Margining framevork vilh regard lo lransaclions in Ixchange Traded
Iunds (ITIs) vas revieved and modihed.
Oclober 04, 2012 Nalionvide broker nelvork of slock exchanges al more lhan 1000
Iocalions made avaiIabIe for dislribuling ubIic issues in eIeclronic
form.
Oclober 09, 2012 Iramevork for re|eclion of oer documenls conlaining lhe iIIuslralive
Iisl of ob|eclive crileria and consequences of re|eclion ul in Iace.
Oclober 12, 2012 IIigibiIily crileria for IIOs revieved.
IIigibiIily crileria for furlher ubIic oers and righls issues lhrough
fasl-lrack roule reIaxed.
AIIs ermilled lo conlribule lovards minimum romolers'
conlribulion.
CeiIing on change in amounl roosed lo be raised as er ob|ecls
of lhe issue, vilhoul re-hIing, increased lo 20 ercenl.
GeneraI cororale uroses caed al 25 ercenl of roceeds raised
by lhe issuer.
Lisled comanies mandaled lo udale lheir discIosures in lhe
roseclus on an annuaI basis and lo make il avaiIabIe in ubIic
domain.
TimeIine for discIosing rice band aIong vilh reIevanl hnanciaI
informalion increased lo al Ieasl five vorking days rior lo
oening of iniliaI ubIic oer.
Minimum aIicalion size for aII inveslors increased lo ` 10,000 -
` 15,000.
RelaiI individuaI inveslors lo be aIIoued al Ieasl lhe minimum
aIicalion size, sub|ecl lo avaiIabiIily of shares in aggregale.
206
Date Announcements
Contd.
Non-relaiI inveslors barred from vilhdraving or Iovering lhe size
of bids al any slage.
Maximum discounl of hve ercenl lo lhe rice for QuaIihed
InslilulionaI IIacemenl (QII), caIcuIaled as er SII (ICDR)
ReguIalions, ermiued.
ook Running Lead Manager (RLM) vhich is aIso an associale of
lhe issuer reslricled lo lhe roIe of markeling lhe issue.
November 01, 2012 The rocedure for change of name of individuaI enehciaI Ovner's
(O) accounl vas simIihed
November 07, 2012 Debl aIIocalion mechanism for Ioreign InslilulionaI Inveslors (III)
revised.
Wilh regard lo arbilralion mechanism in slock exchanges, a cIienl,
vho has cIaim / counler cIaim ulo ` 10 Iakh and hIes arbilralion
reference, shaII be exeml from lhe deosil.
November 15, 2012 SII, as er lhe guideIines issued by RI from lime lo lime, ermiued
muluaI funds lo arliciale in Credil DefauIl Svas (CDS) markel.
November 19, 2012 SII (MuluaI Iunds) ReguIalions, 1996 amended as foIIovs :
i. Ixil Ioad charged, if any, vouId be crediled lo lhe scheme.
ii. Service lax on brokerage and lransaclion cosl aid for execulion of
lrade, if any, shaII be vilhin lhe Iimil rescribed under reguIalion
52 of lhe ReguIalions.
iii. IrudenliaI Iimils and discIosures on orlfoIio concenlralion risk in
debl-orienled muluaI fund schemes revieved.
November 20, 2012 Mini derivalive (Iulures & Olions) conlracl on index (SINSIX &
Nifly) vilh a minimum conlracl size of ` 1 Iakh vas disconlinued.
AccordingIy, lhe Iasl exiry avaiIabIe on mini derivalive (Iulures &
Olions) conlracl on Index (Sensex & Nifly) vas in }anuary 2013
November 22, 2012 Securilies Lending and orroving (SL) Iramevork vas modihed lo
inlroduce roII-over faciIily for exisling Ienl or borrov osilions and lo
inlroduce Iiquid Index Ixchange Traded Iunds (ITIs) under lhe SL
scheme.
November 27, 2012 GuideIines on Invenlory Managemenl for Markel Makers of SmaII and
Medium Inlerrises (SMI) Ixchange / IIalform.
December 06, 2012 Ra|iv Gandhi Iquily Savings Scheme, a lax saving scheme, vas
nolihed by lhe Governmenl lo encourage ov of savings in hnanciaI
207
Date Announcements
Contd.
inslrumenls and imrove lhe delh of domeslic cailaI markel by
bringing in nev inveslors.
December 13, 2012 IroceduraI norms on recognilions, ovnershi and governance for
slock exchanges and cIearing cororalions.
SII rescribed a framevork of dynamic lrade based rice checks
lo revenl aberranl orders or unconlroIIed lrades.
December 19, 2012 ReaIignmenl of lhe ase Minimum CailaI (MC) requiremenls
vilh lhe risk rohIes of lhe slock brokers/lrading members in cash
/ derivalive segmenl of lhe slock exchange vilh a SII regislered
QuaIihed Deosilory Iarlicianl (QDI).
}anuary 01, 2013 Debl aIIocalion mechanism for Ioreign InslilulionaI Inveslors (III)
revised.
}anuary 03, 2013 CIarihcalion on CIause 36 of lhe Iquily Lisling Agreemenl: aII lhe
evenls or maleriaI informalion vhich viII have a bearing on lhe
erformance / oeralions of lhe comany as veII as rice sensilive
informalion shaII be hrsl disseminaled lo lhe slock exchanges.
}anuary 04, 2013 Inlermediaries vere direcled lo verify lhe Iermanenl Accounl number
(IAN) of lheir cIienls onIine al lhe income lax vebsile vilhoul
insisling on lhe originaI IAN card, rovided lhal lhe cIienl has
resenled a documenl for roof of idenlily olher lhan lhe IAN card.
}anuary 17, 2013 ImIoyee benehl schemes of Iisled comanies required lo be aIigned
vilh SII (ISOS and ISIS) GuideIines, 1999 and reslrained from
acquiring lheir securilies from lhe secondary markel.
}anuary 24, 2013 As er lhe Irevenlion of Money Laundering RuIes, 2005, guideIines
on Idenlihcalion of enehciaI Ovnershi vere framed.
In order lo caler lo lhe unique characlerislics of debl markels,
guideIines on dedicaled debl segmenl on lhe slock exchanges vere
slruclured.
}anuary 25, 2013 GuideIines on OIS mechanism issued vide circuIar daled }uIy 18, 2012
vere modihed lo make il more economicaI, ecienl and lransarenl.
Iebruary 04, 2013 Revised requiremenls ul in Iace for lhe slock exchanges and Iisled
comanies in resecl of Scheme of Arrangemenl under lhe Comanies
Acl, 1956.
Iebruary 06, 2013 Time Ieriod for iniliaI oering and aIIolmenl of unils of muluaI fund
scheme eIigibIe under Ra|iv Gandhi Iquily Savings Scheme, 2012
(RGISS) vas exlended from hfleen days lo lhirly days.
208
Date Announcements
Contd.
Iebruary 08, 2013 Increase in III debl Iimil for Governmenl and cororale debl
calegory.
Liquidily Inhancemenl Schemes for iIIiquid securilies in equily
cash markel ermiued.
Iebruary 14, 2013 Trading lhrough eriodic caII auclion vas inlroduced for iIIiquid scris
in equily markel and lhe re-oen session vas exlended lo aII olher
scris in lhe equily markel.
Iebruary 15, 2013 Condilions for designaling GoId Deosil Scheme (GDS) of banks as one
of lhe inslrumenl of inveslmenl by goId ITIs of muluaI funds vere
framed.
March 01, 2013 In conlinualion vilh circuIar daled Augusl 28, 2012, delaiIed roadma
and guideIines for enabIing arliaI lvo-vay fungibiIily of Indian
Deosilory Receils (IDRs) vere rovided.
March 15, 2013 Regislered Debenlure Truslees (DTs) and Credil Raling Agencies
(CRAs) vere direcled lo share informalion regarding issuer comanies
vilh each olher.
March 18, 2013 In order lo address lhe issue of mis-seIIing, aramelers lo enabIe
muluaI funds lo 'LabeI' lheir schemes vere slruclured.
Inlroduclion of aulomalic rocess and common ooI of arbilralors
in arbilralion mechanism lhrough slock exchanges.
March 20, 2013 IIIs vere ermiued lo oer governmenl securilies, cororale bonds,
cash and foreign sovereign securilies vilh AAA ralings as coIIaleraI,
for lheir lransaclions in bolh cash and I&O coIIaleraI segmenls.
March 21, 2013 Comanies vhose securilies are Iisled on lhe slock exchanges vere
direcled lo use, eilher direclIy or lhrough lheir RTI & STA, any RI
(Reserve ank of India) aroved eIeclronic mode of aymenl for
making cash aymenls lo lhe inveslors.
March 26, 2013 Amendmenls lo SII (SubslanliaI Acquisilion of Shares and Takeovers)
ReguIalions, 2011 vere carried oul lo address cerlain concerns raised
during imIemenlalion.
March 28, 2013 Amendmenl lo SII KYC (Knov Your CIienl) Regislralion Agency
ReguIalions, 2011.

Sebi Annual Report 2013

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Sebi Annual Report 2013

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This Report is in conformity with the format as per the Securities

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