CAPITAL MARKETS AND SECURITIES LAWS - ICSI

1 ISTUDY MATERIALEXECUTIVE PROGRAMMECAPITAL MARKETSANDSECURITIES LAWSMODULE IIPAPER 6 ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003tel 011-4534 1000, 4150 4444fax +91-11-2462 6727email THE INSTITUTE OF COMPANY SECRETARIES OF INDIATIMING OF HEADQUARTERSM onday to FridayOffice Timings to Dealing TimingsWithout financial transactions to financial transactions to , Typesetting by AArushi Graphics, Prashant Vihar, New Delhi, andPrinted at M P Printers/October 2017iiiiiEXECUTIVE PROGRAMMECAPITAL MARKETSAND SECURITIES LAWSThe Indian CAPITAL market has grown exponentially in terms of resource mobilization, number of listed stocks, market capitalization, trading volumes, and investors base. Along with this growth, the profiles of the investors,issuers and intermediaries have changed significantly. The market has witnessed a fundamental institutionalchange resulting in drastic reduction in transaction costs and significant improvement in efficiency, transparencyand safety.

2 The measures taken by SEBI such as, market determined allocation of resources, rolling settlement,sophisticated risk management and derivatives trading have greatly improved the framework and efficiencyof trading and settlement, making the Indian CAPITAL market qualitatively comparable to many study material has been published to aid the students in preparing for the CAPITAL market and SecuritiesLaws paper of the CS Executive Programme. It is part of the educational kit and takes the students step by stepthrough each phase of preparation stressing key concepts, pointers and procedures. Company Secretaryshipbeing a professional course, the examination standards are set very high, with emphasis on knowledge ofconcepts, applications, procedures, for which sole reliance on the contents of this study material may not beenough. Besides, as per the Company Secretaries Regulations, 1982,students are expected to be conversantwith the amendments to the laws made upto six months preceding the date of examination.

3 The materialmay, therefore, be regarded as the basic material and must be read alongwith the original Bare Acts, Rules,Regulations, Academic Guidance etc. This study has been updated upto October, subject of CAPITAL market and SECURITIES laws is inherently complicated and is subject to constant refinementthrough new primary legislations, rules and regulations made thereunder. It, therefore becomes necessary forevery student to constantly update himself with the various legislative changes made from time to time byreferring to the Institute s journal Chartered Secretary as well as other professional the event of any doubt, students may write to the Directorate of Studies for clarification care has been taken in publishing this study material yet the possibility of errors, omissions and/ordiscrepancies cannot be ruled out. This publication is released with an understanding that the Institute shall notbe responsible for any errors, omissions and/or discrepancies or any action taken in that there be any discrepancy, error or omission noted in the study material, the Institute shall be obliged ifthe same is brought to its study material is based on those sections of the Companies Act, 2013 and the rules made there underwhich have been notified by the Government of India and came into force April 01, 6: CAPITAL MARKETS ANDSECURITIES laws (100 Marks)Level of Knowledge:ExpertKnowledgeObjective:To acquire knowledge and understanding of SECURITIES laws and the regulatory framework of :Part A.

4 CAPITAL MARKETS (60 Marks) of CAPITAL market Indian CAPITAL market Authorities Governing CAPITAL MARKETS in India Profile of SECURITIES market SECURITIES market Reforms and Regulatory Measures to Promote Investor Confidence Features of Developed CAPITAL market : IOSCO Overview of Depository System in market Instruments and Rating CAPITAL market Instruments: Equity, Debentures, Preference Shares, Sweat Equity, Non-Voting Shares,Share Warrants Pure, Hybrid and Derivatives Rating and Grading of Instruments: Concept, Scope and Significance, Regulatory Framework Rating Agencies in India, Rating market Intermediaries Primary market and Secondary market Intermediaries: Role and Functions, Merchant Bankers, StockBrokers, Syndicate Members, Registrars, Underwriters, Bankers to an Issue, Portfolio Managers,Debenture Trustees, Foreign Institutional Investors, Depositories, Depositories Participants, Custodians,Credit Rating Agencies, Venture Capitalists4.

5 market Infrastructure Institutions - Stock Exchanges Functions and Significance of Stock Exchanges Operations and Trading Mechanism of Stock Exchanges Settlement of SECURITIES , Stock market Indices, Risk Management, Surveillance Mechanism at StockExchanges, Straight through Processing Demutualization of Stock Exchanges SME market Debt market : Instruments, Listing, Primary and Secondary market Growth of Money market in India Structure and Institutional Mechanismv Money market Instruments: Treasury Bills, Commercial Bills, Commercial Paper, Factoring Agreements& Discounting of Funds Mutual Fund: Introduction, Definitions, Schemes, Risks Involved, Setting Up of Mutual Funds, Role inFinancial market Advantage of Investment in Mutual Fund Concept of Trustee and Asset Management Company Legal & Regulatory Framework Offer Document, Accounting Valuation & Taxation Investment Management: Equity & Debt Portfolio, Measuring & Evaluating Mutual Fund Performance Investor s Rights and CAPITAL Concept of Venture CAPITAL Registration, Investment Conditions and Restrictions Foreign Venture CAPITAL Investors Private CAPITAL Investment Schemes Regulatory Framework Restrictions on Business Activities Submission of Information and Documents Trustees and their Mobilization in International CAPITAL market Listing of SECURITIES Issued Outside India Foreign Currency Convertible Bonds Global Depository Receipts American Depository Receipts External Commercial Borrowings Procedure for Issue of Various Depository Receipts Indian Depository Receipts.

6 Procedure for Making Issue of IDRs, Conditions for Issue of IDRs, Listingof Portfolio Investors Concept of FPIs, Registration of FPIs, Offshore Derivative Instruments (ODIs), Obligation of FPIs andDDP & Inspection & Redeemable Preference Shares Issue and listing of Non-convertible Redeemable Preference Shares, Obligations of the Issuer andLead Merchant Banker, Issuance & Listing of Non-Equity Regulatory CAPITAL Instruments by Banksand Inspection and Power of Estate Investment Trusts Registration of Real Estate Investment Trusts, Rights and Responsibilities of Parties to the REIT,Valuer Sponsor and Auditor, Issue and Listing of Units, Investment conditions, related party transactions,Borrowing and valuation of assets, Rights and Meetings of Unit Holders and Investment Trusts Registration of Infrastructure Investment Trusts, Rights and Responsibilities of Parties to the InvIT,Project Manager, Sponsor, Valuer and Auditor, Offer of Units of InvIT and Listing of Units, Investmentconditions.

7 Related Party Transactions, Borrowing and valuation of assets, Rights and Meetings ofUnit Holders and DisclosuresPart B: SECURITIES laws (40 Marks) Contracts (Regulation) Act, Act, 1992 Objective, Power and Functions of SEBI SECURITIES Appellate Tribunal, Appeals, Appearance before Act, 1996 Definitions, Setting up of Depository, its type, Role and Functions Depository Participants Admission of SECURITIES Difference between Dematerialization & Rematerialisation Depository Process Inspection and Penalties Internal Audit and Concurrent Audit of Depository and Listing of SECURITIES Listing of SECURITIES Issue of CAPITAL and Disclosure Requirements (ICDR) Procedure for Issue of Various Types of Shares and Debentures Employee Stock Option Scheme and Employee Stock Purchase Scheme Delisting of Framework relating to SECURITIES market Intermediaries Primary market and Secondary market Intermediaries.

8 Role and Functions, Merchant Bankers, StockBrokers, Syndicate Members, Registrars, Underwriters, Bankers to an Issue, Portfolio Managers,Debenture Trustees, Foreign Institutional Investors, Custodians, Credit Rating Agencies, Overview of Law relating to Insider Trading and Protection Investors Rights and Responsibilities, types of grievances and dealing authority, Investor Educationand Protection Fund (IEPF) under SEBI Regulations and Companies Act, 2013, Financial Education,Investor Grievance Redressal Mechanism at SEBI OF RECOMMENDED BOOKSPAPER 6 : CAPITAL MARKETS AND SECURITIES Gordon &: CAPITAL market in India; Himalaya Publishing House, Ram doot,K. NatarajanDr. Bhalerao Marg, Girgaon, Mumbai - Aggarwal:Guide to Indian CAPITAL market ; Bharat Law House, 22, Tarun Enclave,Pitampura, New Delhi 110 Iyer:SEBI Practice Manual; Taxman Allied Service (P) Ltd., 59/32, New RohtakRoad, New Khan:Indian Financial Systems; Tata McGraw Hill, 4/12, Asaf Ali Road, NewDelhi 110 Suryanarayanan &:SEBI Law, Practice & Procedure; Commercial Law Publishers (India)V.

9 VaradarajanPvt. Ltd., 151, Rajindra market , Opp. Tis Hazari Court, Delhi - Bhargava:Compliances and Procedures under SEBI Law; Shreeji Publishers, 8/294, Sunder Vihar, New Delhi 110 :SEBI Kumar Mishra:Venture CAPITAL Financing in India; Shipra Publications, 115A, Vikas Marg,Shakarpur, K Gupta:Financial Institutions and MARKETS ; Kalyani Publishers, 4863/2B, BharatNishja AggarwalRam Road, 24, Daryaganj, New Delhi -110002 Neeti Saraogi: CAPITAL MARKETS and SECURITIES laws simplified, Lawpoint Publication,6C, Mukherjee Road, Annual Report:SEBI, SECURITIES :NSE Yearly PublicationMarket - A and Corporate:Taxmann, 59/32, New Rohtak Road, New Delhi-110 Law Adviser:Corporate Law Adviser, Post Bag No. 3, Vasant Vihar, New Monthly Bulletin:SEBI, News:National Stock Exchange of India Ltd., Mahindra Towers, Worli, : Students are advised to read relevant Bare Acts and Rules and Regulations relating thereto.

10 E-Bulletin Student Company Secretary and Chartered Secretary should also be read regularly for updating the OF STUDY LESSONSPART of CAPITAL market Rating and IPO Infrastructure Institutions - Stock Exchange Trading Investment Investment Mobilization in International CAPITAL Depository Portfolio Redeemable Preference Estate Investment Investment TrustsPART Framework Governing Stock and Exchange Board of and Delisting of of Framework relating to SECURITIES market Trading- An Code- An ProtectionTEST PAPERxCONTENTSPARTA : CAPITAL MARKETS (60 MARKS)LESSON 1 OVERVIEW OF CAPITAL MARKETI ntroduction2 Organisational structure of financial system3 Financial Markets3 Need for CAPITAL market4 Functions of the CAPITAL market4 SECURITIES Market5 Products and market Participants5 Functions of SECURITIES Market6 SECURITIES market and Economic Growth7 Profile of SECURITIES Market8 market Regulation9 SECURITIES market Reforms & Regulatory Measures to Promote Investor Confidence10 Features of Developed CAPITAL market .