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(1) Guidelines to Issuing Companies: The SEBI had issued detailed guidelines for all
companies old as well as new for disclosure of information and protection of the
interests of investors. The guidelines relate to first issue of new companies, first issue
by existing companies, issue of convertible debentures, etc. The guidelines are in
addition to other legal provisions in existence.
After the abolition of the post of CCI, companies were allowed to approach the capital
markets without prior government permission subject to getting their offer documents
cleared by SEBI. In other words, SEBI was given the power to control and regulate
the new issue market as well as the old issues market i.e. stock exchange.
SEBI has introduced a code of advertisement for public issues for ensuring fair and
truthful disclosures. SEBI has also made underwriting of issue optional subject to
certain conditions.
The purpose is to reduce the cost of issue. The purpose behind issuing these
guidelines is to give protection to small investors and avoid their exploitation due to
misleading information.
The SEBI can take action against companies if these guidelines are not followed in
the right spirit. The SEBI may issue fresh guidelines from time-to-time.
Companies have to take the consent of SEBI before bringing its new issue in the
market. This suggests that SEBI has now effective control on the new issue market.
This is one achievement of SEBI.
(2) Regulation of Portfolio Management Services: The highly infringed portfolio
management services (PMS) were placed under the regulation of SEBI since
January 11, 1993. This is the fourth financial activity to be brought under SEBIs
control, the previous ones being stockbrokers and sub-brokers, merchant banking
and insider trading. The violations of the PMS scheme and similar schemes offered
by various banks and merchant banking subsidiaries had come to light during the
securities scam. The Janakiraman Committee had highlighted such blatant misuse in
its report published on August 26, 1992. The SEBI regulations evidently have been
framed keeping the securities scam in mind.
It is noticed that the role of RBI as supervisory head had been highly inefficient in
regard to PMS. The same is the case with the Finance Ministry. SEBI has now been
entrusted with the job of policing the portfolio managers and provide adequate
protection to the investors. This is a good beginning on the part of SEBI and can be
treated as one achievement of SEBI.
(3) Regulation of Mutual Funds: The Mutual Funds were placed under SEBI control on
January 20, 1993. Next to portfolio management services, it is the fifth financial
activity to be brought under SEBIs regulatory framework. Mutual funds have been
barred from indulging in option trading, short selling or carrying forward transactions
in securities. Permission has been granted to invest only in transferable securities in
the money/capital market. Registration would be henceforth granted only to those
mutual funds who can prove their efficiency and conduct business in an orderly
manner, as stipulated by SEBI. These regulatory measures will improve the working
of mutual funds and take them on healthy lines. This is one area where SEBI is
by SEBI. They have to adopt the stipulated capital adequacy norms, abide by the
code of conduct which specifies a high degree of responsibility towards investors in
respect of pricing and premium fixation of issues and disclosures in the prospectus.
Merchant bankers have now a greater degree of accountability in the offer document
and issue process.