SEBI BARE ACT Flashcards
Section 4
“Management of the Board
(1) The Board shall consist of the following members, namely:— (a) a Chairman;
(b) two members from amongst the officials of the Ministry of the Central Governmentdealing with Finance
(c) one member from amongst the officials of the Reserve Bank;
(d) five other members of whom at least three shall be the whole–time members, to beappointed by the Central Government.
(2) The general superintendence, direction and management of the affairs of the Board shall vestin a Board of members, which may exercise all powers and do all acts and things which may beexercised or done by the Board.
(3) Save as otherwise determined by regulations, the Chairman shall also have powers ofgeneral superintendence and direction of the affairs of the Board and may also exercise allpowers and do all acts and things which may be exercised or done by that Board.
(4) The Chairman and members referred to in clauses (a) and (d) of sub–section (1) shall beappointed by the Central Government and the members referred to in clauses (b) and (c) of thatsub–section shall be nominated by the Central Government and the Reserve Bank respectively.
(5) The Chairman and the other members referred to in clauses (a) and (d) of sub–section (1)shall be persons of ability, integrity and standing who have shown capacity in dealing withproblems relating to securities market or have special knowledge or experience of law, finance,economics, accountancy, administration or in any other discipline which, in the opinion of theCentral Government, shall be useful to the Board.”
Section 5
“Term of office and conditions of service of Chairman and members of the Board
(1) The term of office and other conditions of service of the Chairman and the membersreferred to in clause (d) of sub–section (1) of section 4 shall be such as may be prescribed.(2) Notwithstanding anything contained in sub–section (1), the Central Government shall havethe right to terminate the services of the Chairman or a member appointed under clause (d) ofsub–section (1) of section 4, at any time before the expiry of the period prescribed under subsection (1), by giving him notice of not less than three months in writing or three months‘ salaryand allowances in lieu thereof, and the Chairman or a member, as the case may be, shall alsohave the right to relinquish his office, at any time before the expiry of the period prescribedunder sub–section (1), by giving to the Central Government notice of not less than three monthsin writing.
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Section 6
“Removal of member from office
The Central Government shall remove a member from office if he—
(a) is, or at any time has been, adjudicated as insolvent;
(b) is of unsound mind and stands so declared by a competent court;
(c) has been convicted of an offence which, in the opinion of the Central Government,involves a moral turpitude;
(d) has, in the opinion of the Central Government, so abused his position as to render hiscontinuation in office detrimental to the public interest :Provided that no member shall be removed under this clause unless he has been given areasonable opportunity of being heard in the matter.
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Section 7
“Meetings
(1) The Board shall meet at such times and places, and shall observe such rules of procedurein regard to the transaction of business at its meetings (including quorum at such meetings) asmay be provided by regulations.
(2) The Chairman or, if for any reason, he is unable to attend a meeting of the Board, any othermember chosen by the members present from amongst themselves at the meeting shall presideat the meeting.
(3) All questions which come up before any meeting of the Board shall be decided by a majorityvotes of the members present and voting, and, in the event of an equality of votes, theChairman, or in his absence, the person presiding, shall have a second or casting vote.”
Section 7A
“Member not to participate in meetings in certain cases
Any member, who is a director of a company and who as such director has any direct orindirect pecuniary interest in any matter coming up for consideration at a meeting of the Board,shall, as soon as possible after relevant circumstances have come to his knowledge, disclose thenature of his interest at such meeting and such disclosure shall be recorded in the proceedingsof the Board, and the member shall not take any part in any deliberation or decision of theBoard with respect to that matter.
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Section 8
“Vacancies, etc., not to invalidate proceedings of Board
No act or proceeding of the Board shall be invalid merely by reason of—(a) any vacancy in, or any defect in the constitution of, the Board; or(b) any defect in the appointment of a person acting as a member of the Board; or(c) any irregularity in the procedure of the Board not affecting the merits of the case.
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Section 9
“Officers and employees of the Board
(1) The Board may appoint such other officers and employees as it considers necessary for theefficient discharge of its functions under this Act.(2) The term and other conditions of service of officers and employees of the Board appointedunder sub–section (1) shall be such as may be determined by regulations.
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Section 10
TRANSFER OF ASSETS, LIABILITIES, ETC., OF THE EXISTING SECURITIES ANDEXCHANGE BOARD TO THE BOARD
Section 11
“POWERS AND FUNCTIONS OF THE BOARD
(1) Subject to the provisions of this Act, it shall be the duty of the Board to protect theinterests of investors in securities and to promote the development of, and to regulate thesecurities market, by such measures as it thinks fit.
(2) Without prejudice to the generality of the foregoing provisions, the measures referred totherein may provide for—
(a) regulating the business in stock exchanges and any other securities markets;
(b) registering and regulating the working of stock brokers, sub–brokers, share transferagents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchantbankers, underwriters, portfolio managers, investment advisers and such otherintermediaries who may be associated with securities markets in any manner;13[(ba) registering and regulating the working of the depositories,14[participants], custodiansof securities, foreign institutional investors, credit rating agencies and such otherintermediaries as the Board may, by notification, specify in this behalf;]
(c) registering and regulating the working of 15[venture capital funds and collectiveinvestment schemes], including mutual funds;
(d) promoting and regulating self–regulatory organisations;
(e) prohibiting fraudulent and unfair trade practices relating to securities markets;
(f) promoting investors‘ education and training of intermediaries of securities markets;
(g) prohibiting insider trading in securities;
(h) regulating substantial acquisition of shares and take over of companies;
(i) calling for information from, undertaking inspection, conducting inquiries and audits ofthe 16[stock exchanges, mutual funds, other persons associated with the securitiesmarket], intermediaries and self–regulatory organisations in the securities market;
(j) performing such functions and exercising such powers under the provisions of 19[* * *]the Securities Contracts (Regulation) Act, 1956 (42 of 1956), as may be delegated to it bythe Central Government;
(k) levying fees or other charges for carrying out the purposes of this section;
(l) conducting research for the above purposes;
(m) performing such other functions as may be prescribed.
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Section 11(2A)
“Inspection of any book, register, etc.,
Without prejudice to the provisions contained in sub–section (2), the Board may takemeasures to undertake inspection of any book, or register, or other document or record of anylisted public company or a public company (not being intermediaries referred to in section 12)which intends to get its securities listed on any recognised stock exchange where the Board hasreasonable grounds to believe that such company has been indulging in insider trading orfraudulent and unfair trade practices relating to securities market.]
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Section 11(4)
“Passing of an order by Board
Without prejudice to the provisions contained in sub–sections (1), (2), (2A) and (3) andsection 11B, the Board may, by an order, for reasons to be recorded in writing, in the interests ofinvestors or securities market, take any of the following measures, either pending investigationor inquiry or on completion of such investigation or inquiry, namely:—(a) suspend the trading of any security in a recognised stock exchange;
(b) restrain persons from accessing the securities market and prohibit any person associatedwith securities market to buy, sell or deal in securities;
(c) suspend any office–bearer of any stock exchange or self–regulatory organisation fromholding such position;
(d) impound and retain the proceeds or securities in respect of any transaction which isunder investigation;
(e) attach, after passing of an order on an application made for approval by the JudicialMagistrate of the first class having jurisdiction, for a period not exceeding one month,one or more bank account or accounts of any intermediary or any person associatedwith the securities market in any manner involved in violation of any of the provisionsof this Act, or the rules or the regulations made thereunder :Provided that only the bank account or accounts or any transaction entered therein, sofar as it relates to the proceeds actually involved in violation of any of the provisions ofthis Act, or the rules or the regulations made thereunder shall be allowed to be attached;
(f) direct any intermediary or any person associated with the securities market in anymanner not to dispose of or alienate an asset forming part of any transaction which isunder investigation :
Provided that the Board may, without prejudice to the provisions contained in sub–section (2) orsub–section (2A), take any of the measures specified in clause (d) or clause (e) or clause (f), inrespect of any listed public company or a public company (not being intermediaries referred toin section 12) which intends to get its securities listed on any recognised stock exchange wherethe Board has reasonable grounds to believe that such company has been indulging in insidertrading or fraudulent and unfair trade practices relating to securities market :Provided further that the Board shall, either before or after passing such orders, give anopportunity of hearing to such intermediaries or persons concerned
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Section 11A
“Board to regulate or prohibit issue of prospectus, offer document or advertisement soliciting money for issue of securities
(1) Without prejudice to the provisions of the Companies Act, 1956 (1 of 1956), the Boardmay, for the protection of investors,—
(a) specify, by regulations—
(i) the matters relating to issue of capital, transfer of securities and other mattersincidental thereto; and
(ii) the manner in which such matters shall be disclosed by the companies;
(b) by general or special orders—
(i) prohibit any company from issuing prospectus, any offer document, oradvertisement soliciting money from the public for the issue of securities;
(ii) specify the conditions subject to which the prospectus, such offer document oradvertisement, if not prohibited, may be issued.
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Section 11AA
“Collective Investment Scheme
Any scheme or arrangement which satisfies the conditions referred to in sub–section(2) or sub–section (2A) shall be a collective investment scheme:
Provided that any pooling of funds under any scheme or arrangement, whichis not registered with the Board or is not covered under sub–section (3), involving a corpusamount of one hundred crore rupees or more shall be deemed to be a collective investmentscheme.
Requisite Conditions:
Any scheme or arrangement made or offered by any 31[person] under which,—
(i) the contributions, or payments made by the investors, by whatever name called, arepooled and utilized for the purposes of the scheme or arrangement;
(ii) the contributions or payments are made to such scheme or arrangement by the investorswith a view to receive profits, income, produce or property, whether movable orimmovable, from such scheme or arrangement;
(iii) the property, contribution or investment forming part of scheme or arrangement,whether identifiable or not, is managed on behalf of the investors;
(iv) the investors do not have day–to–day control over the management and operation of thescheme or arrangement.
(v)Any scheme or arrangement made or offered by any person satisfying the conditions asmay be specified in accordance with the regulations made under this Act
Exceptions:
any scheme orarrangement –
(i) made or offered by a co–operative society registered under the Co–operative SocietiesAct, 1912 (2 of 1912) or a society being a society registered or deemed to be registeredunder any law relating to co–operative societies for the time being in force in any State;
(ii) under which deposits are accepted by non–banking financial companies as defined inclause (f) of section 45–I of the Reserve Bank of India Act, 1934 (2 of 1934);
(iii) being a contract of insurance to which the Insurance Act, 1938 (4 of 1938), applies;
(iv) providing for any Scheme, Pension Scheme or the Insurance Scheme framed under theEmployees Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952);
(v) under which deposits are accepted under section 58A of the Companies Act, 1956 (1 of1956);
(vi) under which deposits are accepted by a company declared as a Nidhi or a mutualbenefit society under section 620A of the Companies Act, 1956 (1 of 1956);
(vii) falling within the meaning of Chit business as defined in clause (d) of section 2 of theChit Fund Act, 1982 (40 of 1982);
(viii) under which contributions made are in the nature of subscription to a mutual fund;
(ix) such other scheme or arrangement which the Central Government may, in consultationwith the Board, notify,
shall not be a collective investment scheme. “
Section 11B
“Power to issue Directions
Save as otherwise provided in section 11, if after making or causing to be made an enquiry,the Board is satisfied that it is necessary,—
(i) in the interest of investors, or orderly development of securities market; or
(ii) to prevent the affairs of any intermediary or other persons referred to in section 12 beingconducted in a manner detrimental to the interest of investors or securities market; or
(iii) to secure the proper management of any such intermediary or person, it may issue such directions,—(a) to any person or class of persons referred to in section 12, or associated with thesecurities market; or(b) to any company in respect of matters specified in section 11A, as may be appropriate inthe interests of investors in securities and the securities market.”
Section 11C
“Investigation
- Grounds for issue of an order of investigation:
(a) the transactions in securities are being dealt with in a manner detrimental to theinvestors or the securities market; or
(b) any intermediary or any person associated with the securities market has violated any ofthe provisions of this Act or the rules or the regulations made or directions issued by theBoard thereunder,it may, at any time by order in writing, direct any person (hereafter in this section referred to asthe Investigating Authority) specified in the order to investigate the affairs of such intermediaryor persons associated with the securities market and to report thereon to the Board.
(2) Without prejudice to the provisions of sections 235 to 241 of the Companies Act, 1956 (1 of1956), it shall be the duty of every manager, managing director, officer and other employee ofthe company and every intermediary referred to in section 12 or every person associated withthe securities market to preserve and to produce to the Investigating Authority or any personauthorised by it in this behalf, all the books, registers, other documents and record of, orrelating to, the company or, as the case may be, of or relating to, the intermediary or suchperson, which are in their custody or power.
(3) The Investigating Authority may require any intermediary or any person associated withsecurities market in any manner to furnish such information to, or produce such books, orregisters, or other documents, or record before him or any person authorised by it in this behalfas it may consider necessary if the furnishing of such information or the production of suchbooks, or registers, or other documents, or record is relevant or necessary for the purposes of itsinvestigation.
(4) The Investigating Authority may keep in its custody any books, registers, other documentsand record produced under sub–section (2) or sub–section (3) for six months and thereafter shallreturn the same to any intermediary or any person associated with securities market by whomor on whose behalf the books, registers, other documents and record are produced :Provided that the Investigating Authority may call for any book, register, other document andrecord if they are needed again :Provided further that if the person on whose behalf the books, registers, other documents andrecord are produced requires certified copies of the books, registers, other documents andrecord produced before the Investigating Authority, it shall give certified copies of such books,registers, other documents and record to such person or on whose behalf the books, registers,other documents and record were produced.
(5) Any person, directed to make an investigation under sub–section (1), may examine on oath,any manager, managing director, officer and other employee of any intermediary or any personassociated with securities market in any manner, in relation to the affairs of his business andmay administer an oath accordingly and for that purpose may require any of those persons toappear before it personally.
(6) If any person fails without reasonable cause or refuses—
(a) to produce to the Investigating Authority or any person authorised by it in this behalfany book, register, other document and record which is his duty under sub–section (2) orsub–section (3) to produce; or
(b) to furnish any information which is his duty under sub–section (3) to furnish; or
(c) to appear before the Investigating Authority personally when required to do so undersub–section (5) or to answer any question which is put to him by the InvestigatingAuthority in pursuance of that sub–section; or
(d) to sign the notes of any examination referred to in sub–section (7),he shall be punishable with imprisonment for a term which may extend to one year, or withfine, which may extend to one crore rupees, or with both, and also with a further fine whichmay extend to five lakh rupees for every day after the first during which the failure or refusalcontinues.
(7) Notes of any examination under sub–section (5) shall be taken down in writing and shall beread over to, or by, and signed by, the person examined, and may thereafter be used in evidenceagainst him.
(8) Where in the course of investigation, the Investigating Authority has reasonable ground tobelieve that the books, registers, other documents and record of, or relating to, any intermediaryor any person associated with securities market in any manner, may be destroyed, mutilated,altered, falsified or secreted, the Investigating Authority may make an application to 38[theMagistrate or Judge of such designated court in Mumbai, as may be notified by the CentralGovernment] for an order for the seizure of such books, registers, other documents and record.39(8A) The authorised officer may requisition the services of any police officer or any officer ofthe Central Government, or of both, to assist him for all or any of the purposes specified in subsection (8) and it shall be the duty of every such officer to comply with such requisition. After considering the application and hearing the Investigating Authority, if necessary, 40[theMagistrate or Judge of the Designated Court] may, by order, authorise the InvestigatingAuthority –(a) to enter, with such assistance, as may be required, the place or places where such books,registers, other documents and record are kept;(b) to search that place or those places in the manner specified in the order; and(c ) to seize books, registers, other documents and record, it considers necessary for thepurposes of the investigation:Provided that 41[the Magistrate or Judge of the Designated Court] shall not authorise seizure ofbooks, registers, other documents and record, of any listed public company or a public company(not being the intermediaries specified under section 12) which intends to get its securities listedon any recognised stock exchange unless such company indulges in insider trading or marketmanipulation.
(10) The Investigating Authority shall keep in its custody the books, registers, other documentsand record seized under this section for such period not later than the conclusion of theinvestigation as it considers necessary and thereafter shall return the same to the company or theother body corporate, or, as the case may be, to the managing director or the manager or anyother person, from whose custody or power they were seized and inform 42[the Magistrate orJudge of the Designated Court] of such return:
Provided that the Investigating Authority may, before returning such books, registers, otherdocuments and record as aforesaid, place identification marks on them or any part thereof.
(11) Save as otherwise provided in this section, every search or seizure made under this sectionshall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973(2 of 1974) relating to searches or seizures made under that Code
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