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THE SECURITIES AND EXCHANGE BOARD OF
INDIA ACT, 1992 No.15 of 1992
[4th April ,1992.] An Act to provide for the establishment of a Board to
protect the interests of investors in securities and to promote the development
of, and to regulate, the securities market and for matters connected therewith
or incidental thereto. Be it enacted by Parliament in the Forty-third Year of the Republic of
India as follows:
CHAPTER
I Short title, extent &
commencement. 1. (1)
This Act may be called the Securities and Exchange Board of India Act,
1992.
(2) It extends to the whole of India.
(3) It shall be deemed to have come into force on the 30th day of January,
1992. Definitions. 2. (1) In
this Act, unless the context otherwise requires, - (a) "Board" means the
Securities and Exchange Board of India established under section 3; (b) "Chairman" means the Chairman of the Board; [1][(ba) "collective investment scheme" means any
scheme or arrangement which satisfies the conditions specified in Section 11AA;] (c) "existing Securities and Exchange
Board" means the Securities and Exchange Board of India constituted under
the Resolution of the Government of India in the Department of Economic Affairs
No.1 (44)SE/86, dated the 12th day of April, 1988; (d) "Fund" means the Fund constituted under
Section 14; (e) "member" means a member of the Board
and includes the Chairman; (f) "notification" means a notification
published in the Official Gazette; (g) "prescribed" means prescribed by rules
made under this Act; (h) "regulations" means the regulations
made by the Board under this Act; [2][(ha) "Reserve Bank" means
the Reserve Bank of India constituted under section 3 of the Reserve Bank of
India Act, 1934(2 of 1934);] (i) "securities" has the meaning assigned to it in
section 2 of the Securities Contracts (Regulation) Act,1956 (42 of 1956). [3][(2) Words and expressions used and
not defined in this Act, but defined in the
Securities Contracts (Regulation) Act, 1956(42 of 1956), [4][or the Depositories Act, 1996],
shall have the meanings respectively assigned to them in that Act.] ESTABLISHMENT
OF THE Establishment and incorporation of
Board. 3. (1) With effect from such date as
the Central Government may, by notification, appoint, there shall be
established, for the purposes of this Act, a Board by the name of the
Securities and Exchange Board of India. (2) The Board shall be
a body corporate by the name aforesaid, having perpetual succession and a
common seal, with power subject to the provisions of this Act, to acquire, hold
and dispose of property, both movable and immovable, and to contract, and
shall, by the said name, sue or be sued. (3) The head office of
the Board shall be at Bombay. (4) The Board may
establish offices at other places in India. Management of the Board. 4. (1) The Board shall consist of
the following members, namely:- (a) a Chairman; (b) two members from amongst the officials of the [5][Ministry]
of the Central Government dealing with Finance [6][and
administration of the Companies Act, 1956(1 of 1956)]; (c) one member from amongst the officials of [7][the
Reserve Bank]; [8][(d) five other members of whom at least
three shall be the whole-time members] to be appointed by the central
Government. (2)
The general superintendence, direction and management of the affairs of the
Board shall vest in a Board of members, which may exercise all powers and do
all acts and things which may be exercised or done by the Board. (3) Save as otherwise
determined by regulations, the Chairman shall also have powers of general
superintendence and direction of the affairs of the Board and may also exercise
all powers 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 be
appointed by the Central Government and the members referred to in clauses (b)
and (c) of that sub-section shall be nominated by the Central Government and
the [9][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 with problems 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 the Central Government, shall be useful
to the Board. Term of office and conditions of
service of Chairman and members of the Board. 5. (1) The term of office and other
conditions of service of the Chairman and the members referred 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 have the
right to terminate the services of the Chairman or a member appointed under
clause (d) of sub-section (1) of section 4, at any time before the expiry of
the period prescribed under sub-section (1), by giving him notice of not less
than three months in writing or three months salary and allowances in lieu
thereof, and the Chairman or a member, as the case may be, shall also have the
right to relinquish his office, at any time before the expiry of the period
prescribed under sub-section (1), by giving to the Central Government notice of
not less than three months in writing. Removal of member from office. 6. [10][
] 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; [11][(d) ...] (e) has, in the opinion of the Central Government, so abused his
position as to render his continuation in office detrimental to the public
interest: Provided that no member shall be removed under this clause
unless he has been given a reasonable opportunity of being heard in the
matter. Meetings. 7. (1) The Board shall meet at such times and
places, and shall observe such rules of procedure in regard to the transaction
of business at its meetings (including quorum at such meetings) as may be
provided by regulations. (2) The Chairman or, if
for any reason, he is unable to attend a meeting of the Board, any other member
chosen by the members present from amongst themselves at the meeting shall preside
at the meeting. (3) All questions which
come up before any meeting of the Board shall be decided by a majority votes of
the members present and voting, and, in the event of an equality of votes, the
Chairman, or in his absence, the person presiding, shall have a second or
casting vote. Member not to participate in
meetings in certain cases. [12] [7A. Any member, who is a
director of a company and who as such director has any direct or indirect
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 the nature of his interest at such meeting and such
disclosure shall be recorded in the proceedings of the Board, and the member
shall not take any part in any deliberation or decision of the Board with
respect to that matter.] Vacancies etc., not to invalidate
proceedings of Board. 8. 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. Officers and employees of the Board. 9. (1) The Board may appoint such other
officers and employees as it considers necessary for the efficient discharge of
its functions under this Act. (2) The term and other
conditions of service of officers and employees of the Board appointed under
sub- section (1) shall be such as may be determined by regulations. TRANSFER
OF ASSETS, LIABILITIES, ETC., OF THE EXISTING Transfer of assets, liabilities,
etc., of existing Securities and Exchange Board to the Board. 10. (1) On and from the date of establishment
of the Board,- (a) any reference to the existing
Securities and Exchange Board in any law other than this Act or in any contract
or other instrument shall be deemed as a reference to the Board; (b) all properties and assets, movable and immovable, of, or belonging
to, the existing Securities and Exchange Board, shall vest in the Board; (c) all rights and liabilities of the existing Securities and Exchange
Board shall be transferred to, and be the rights and liabilities of, the
Board; (d) without prejudice to the provisions of clause (c), all debts,
obligations and liabilities incurred, all contracts entered into and all
matters and things engaged to be done by, with or for the existing Securities
and Exchange Board immediately before that date, for or in connection with the
purpose of the said existing Board shall be deemed to have been incurred,
entered into or engaged to be done by, with for, the Board; (e) all sums of money due to the existing Securities and Exchange Board
immediately before that date shall be deemed to be due to the Board; (f) all suits and other legal proceedings instituted or which could have
been instituted by or against the existing Securities and Exchange Board
immediately before that date may be continued or may be instituted by or
against the Board; and (g) every employee holding any office under the
existing Securities and Exchange Board immediately before that date shall hold
his office in the Board by the same tenure and upon the same terms and
conditions of service as respects remuneration, leave, provident fund,
retirement and other terminal benefits as he would have held such office if the
Board had not been established and shall continue to do as so an employee of
the Board or until the expiry of the period of six months from that date if
such employee opts not to be the employee of the Board within such period. (2) Notwithstanding
anything contained in the Industrial Disputes Act, 1947(14 of 1947),
or in any other law for the time being in force, absorption of any employee by
the Board in its regular service under this section shall not entitle such
employee to any compensation under that Act or other law and no such claim
shall be entertained by any court, tribunal or other authority. POWERS
AND FUNCTIONS OF THE BOARD Functions of Board. 11. (1) Subject to the provisions of this Act,
it shall be the duty of the Board to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market, by such measures as it
thinks fit. (2) Without prejudice
to the generality of the foregoing provisions, the measures referred to therein
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 transfer agents, bankers to an issue, trustees of trust
deeds, registrars to an issue, merchant bankers, underwriters, portfolio
managers, investment advisers and such other intermediaries who may be
associated with securities markets in any manner; [13][(ba)
registering and regulating the working of the depositories,[14]
[participants,] custodians of securities, foreign institutional investors,
credit rating agencies and such other intermediaries as the Board may, by
notification, specify in this behalf;] (c) registering and regulating the working of [15][venture
capital funds and collective investment 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 of the [16][
stock exchanges, mutual funds, other persons associated with the securities
market] intermediaries and self- regulatory organizations in the securities
market; [17][(ia)
calling for information and record from any bank or any other authority or
board or corporation established or constituted by or under any Central, State
or Provincial Act in respect of any transaction in securities which is under
investigation or inquiry by the Board;] (j) performing such functions and exercising such powers
under the provisions of [18][...]the
Securities Contracts (Regulation) Act, 1956(42 of 1956), as may be delegated to
it by the Central Government; (k) levying fees or other charges for carrying out the purposes of this
section; (l)
conducting research for the above purposes; [19][(la) calling from or furnishing to
any such agencies, as may be specified by the Board, such information as may be
considered necessary by it for the efficient discharge of its functions;] (m) performing such other functions as may be prescribed. [20][(2A) Without prejudice to the
provisions contained in sub-section (2), the Board may take measures to
undertake inspection of any book, or register, or other document or record of
any listed 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 has reasonable grounds to believe
that such company has been indulging in insider trading or fraudulent and
unfair trade practices relating to securities market.] [21][(3)
Notwithstanding anything contained in any other law for the time being in force
while exercising the powers under [22][clause
(i) or clause (ia) of
sub-section (2) or sub-section (2A)], the Board shall have the same powers as
are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908),while
trying a suit, in respect of the following matters, namely : (i) the
discovery and production of books of account and other documents, at such place
and such time as may be specified by the Board; (ii) summoning and enforcing the attendance of persons and examining
them on oath; (iii) inspection of any books, registers and other documents of any
person referred to in section 12, at any place;] [23][(iv) inspection of any book, or
register, or other document or record of the company referred to in sub-section
(2A); (v) issuing commissions for the examination of witnesses or documents.] [24][(4) Without prejudice to the
provisions contained in sub-sections (1), (2), (2A) and (3) and section 11B,
the Board may, by an order, for reasons to be recorded in writing, in the
interests of investors or securities market, take any of the following
measures, either pending investigation or inquiry or on completion of such
investigation or inquiry, namely:- (a) suspend the trading of any security in a recognized stock exchange; (b) restrain persons from accessing the securities market and prohibit
any person associated with securities market to buy, sell or deal in
securities; (c) suspend any office-bearer of
any stock exchange or self- regulatory
organization from holding such position; (d)impound and retain the proceeds or securities in respect of any
transaction which is under investigation; (e)attach, after passing of an order on an application
made for approval by the Judicial Magistrate 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 associated with the securities
market in any manner involved in violation of any of the provisions of this
Act, or the rules or the regulations made thereunder: Provided that only the bank
account or accounts or any transaction entered therein, so far as it relates to
the proceeds actually involved in violation of any of the provisions of this
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 any manner not to dispose
of or alienate an asset forming part of any transaction which is under
investigation:
Provided that the Board may,
without prejudice to the provisions contained in sub-section (2) or sub-section
(2A), take any of the measures specified in clause (d) or clause (e) or clause
(f), in respect of any listed public company or a public company (not being
intermediaries referred to in section 12) which intends to get its securities
listed on any recognized stock exchange where the Board has reasonable grounds
to believe that such company has been indulging in insider trading or
fraudulent and unfair trade practices relating to securities market: Provided further that the Board shall, either before or after
passing such orders, give an opportunity of hearing to such intermediaries or
persons concerned.] [25][Board to regulate or prohibit
issue of prospectus, offer document or advertisement soliciting money for issue
of securities. 11A
(1) Without prejudice to the provisions of the Companies Act, 1956(1 of
1956), the Board may, for the protection of investors, - (a) specify,
by regulations (i) the matters relating to issue of capital, transfer of
securities and other matters incidental 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, or advertisement soliciting money from the public for the issue of
securities; (ii)specify
the conditions subject to which the prospectus, such offer document or
advertisement, if not prohibited, may be issued. (2) Without prejudice to the provisions of section 21 of the
Securities Contracts (Regulation) Act, 1956(42 of 1956), the Board may specify
the requirements for listing and transfer of securities and other matters
incidental thereto."] [26][Collective Investment Scheme. 11AA (1) Any scheme or arrangement
which satisfies the conditions referred to in sub-section (2) shall be a
collective investment scheme. (2) Any scheme or
arrangement made or offered by any company under which,--- (i)
the
contributions, or payments made by the investors, by whatever name called, are
pooled and utilized solely for the purposes of the scheme or arrangement;
(ii)
the contributions or payments are made to such
scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether
movable or immovable 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 the scheme or arrangement.
(3) Notwithstanding anything contained in sub-section (2), any scheme or arrangement
(i)
made
or offered by a co-operative society registered under the co-operative
societies Act,1912(2 of 1912) or a society being a society registered or deemed
to be registered under any law relating to cooperative societies for the time
being in force in any state; (ii)under which deposits are accepted by non-banking financial companies
as defined in clause (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 the Employees 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 of 1956); (vi)under which deposits are accepted by a company declared as a Nidhi or a mutual benefit 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 the Chit Fund Act, 1982(40 of 1982); (viii)under which contributions made are in the nature of subscription
to a mutual fund; shall
not be a collective investment scheme.] [27][Power to issue directions. 11B. 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 being conducted 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 the securities market; or (b) to any
company in respect of matters specified in section 11A, as may be appropriate
in the interests of investors in securities and the securities market] [28][Investigation. 11C. (1) Where the Board has
reasonable ground to believe that (a)the
transactions in securities are being dealt with in a manner detrimental to the
investors or the securities market; or (b)any
intermediary or any person associated with the securities market has violated
any of the provisions of this Act or the rules or the regulations made or
directions issued by the Board thereunder, It may, at
any time by order in writing, direct any person (hereafter in this section
referred to as the Investigating Authority) specified in the order to
investigate the affairs of such intermediary or 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 of 1956), it shall be the duty of every
manager, managing director, officer and other employee of the company and every
intermediary referred to in section 12 or every person associated with the
securities market to preserve and to produce to the Investigating Authority or
any person authorised by it in this behalf, all the books, registers, other
documents and record of, or relating to, the company or, as the case may be, of
or relating to, the intermediary or such person, which are in their custody or
power. (3) The
Investigating Authority may require any intermediary or any person associated
with securities market in any manner to furnish such information to, or produce
such books, or registers, or other documents, or record before it or any person
authorized by it in this behalf as it may consider necessary if the furnishing
of such information or the production of such books, or registers, or other
documents, or record is relevant or necessary for the purposes of its investigation.
(4) The
Investigating Authority may keep in its custody any books, registers, other
documents and record produced under sub-section (2) or sub-section (3) for six
months and thereafter shall return the same to any intermediary or any person
associated with securities market by whom or 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 and record if they are needed again: Provided further
that if the person on whose behalf the books, registers, other documents and
record are produced requires certified copies of the books, registers, other
documents and record 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 person associated with securities market in any manner, in
relation to the affairs of his business and may administer an oath accordingly
and for that purpose may require any of those persons to appear 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
behalf any book, register, other document and record which it is his duty under
sub-section (2) or sub-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
under sub-section (5) or to answer any question which is put to him by the
Investigating Authority 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 with fine, which may
extend to one crore rupees, or with both, and also with a further fine which
may extend to five lakh rupees for every day after the first during which the
failure or refusal continues. (7) Notes of
any examination under sub-section (5) shall be taken down in writing and shall
be read over to, or by, and signed by, the person examined, and may thereafter
be used in evidence against him. (8) Where in
the course of investigation, the Investigating Authority has reasonable ground
to believe that the books, registers, other documents and record of, or
relating to, any intermediary or 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 the Judicial Magistrate of
the first class having jurisdiction for an order for the seizure of such books,
registers, other documents and record. (9) After
considering the application and hearing the Investigating Authority, if
necessary, the Magistrate may, by order, authorise the Investigating Authority
(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
the purposes of the investigation: Provided
that the Magistrate shall not authorize seizure of books, 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 listed on any recognised stock exchange unless such company indulges
in insider trading or market manipulation. (10) The
Investigating Authority shall keep in its custody the books, registers, other
documents and record seized under this section for such period not later than
the conclusion of the investigation as it considers necessary and thereafter
shall return the same to the company or the other body corporate, or, as the
case may be, to the managing director or the manager or any other person, from
whose custody or power they were seized and inform the Magistrate of such
return; Provided
that the Investigating Authority may, before returning such books, registers,
other documents 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
section shall 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. Cease and desist proceedings. 11D. If the Board finds, after causing an
inquiry to be made, that any person has violated, or is likely to violate, any
provisions of this Act, or any rules or regulations made thereunder, it may
pass an order requiring such person to cease and desist from committing or
causing such violation: Provided
that the Board shall not pass such order in respect of any listed public
company or a public company (other than the intermediaries specified under
section 12) which intends to get its securities listed on any recognized stock
exchange unless the Board has reasonable grounds to believe that such company
has indulged in insider trading or market manipulation.] REGISTRATION
CERTIFICATE Registration of stock brokers,
sub-brokers, share transfer agents, etc. 12. (1) No stock-broker, sub-
broker, share transfer agent, banker to an issue, trustee of trust deed,
registrar to an issue, merchant banker, underwriter, portfolio manager,
investment adviser and such other intermediary who may be associated with
securities market shall buy, sell or deal in securities except under, and in
accordance with, the conditions of a certificate of registration obtained from
the Board in accordance with the [29][regulations]
made under this Act: Provided
that a person buying or selling securities or otherwise dealing with the
securities market as a stock- broker, sub-broker, share transfer agent, banker
to an issue, trustee of trust deed, registrar to an issue, merchant banker,
underwriter, portfolio manager, investment adviser and such other intermediary
who may be associated with securities market immediately before the
establishment of the Board for which no registration certificate was necessary
prior to such establishment, may continue to do so for a period of three months
from such establishment or, if he has made an application for such registration
within the said period of three months, till the disposal of such application.
[30][Provided further that any
certificate of registration, obtained immediately before the commencement of
the Securities Laws (Amendment) Act, 1995, shall be deemed to have been
obtained from the Board in accordance with the regulations providing for such
registration.
(1A) No depository, [31][participant,]
custodian of securities, foreign institutional investor, credit rating agency
or any other intermediary associated with the securities market as the Board
may by notification in this behalf specify, shall buy or sell or deal in
securities except under and in accordance with the conditions of a certificate
of registration obtained from the Board in accordance with the regulations made
under this Act: Provided
that a person buying or selling securities or otherwise dealing with the
securities market as a depository, [participant,] custodian of securities,
foreign institutional investor or credit rating agency immediately before the
commencement of the Securities Laws (Amendment) Act, 1995, for which no
certificate of registration was required prior to such commencement, may
continue to buy or sell securities or otherwise deal with the securities market
until such time regulations are made under clause (d) of sub-section (2) of
section 30.
(1B) No person shall sponsor or cause to be sponsored or carry on or cause to
be carried on any venture capital funds or collective investment schemes
including mutual funds, unless he obtains a certificate of registration from
the Board in accordance with the regulations: Provided
that any person sponsoring or causing to be sponsored, carrying on or causing
to be carried on any venture capital funds or collective investment schemes
operating in the securities market immediately before the commencement of the
Securities Laws (Amendment) Act, 1995, for which no certificate of registration
was required prior to such commencement, may continue to operate till such time
regulations are made under clause (d) of sub-section (2) of section 30.]
(2) Every application for registration shall be in such manner and on payment
of such fees as may be determined by regulations.
(3) The Board may, by order, suspend or cancel a certificate of registration in
such manner as may be determined by regulations. Provided
that no order under this sub-section shall be made unless the person concerned
has been given a reasonable opportunity of being heard. [32][CHAPTER VA PROHIBITION
OF MANIPULATIVE AND DECEPTIVE DEVICES, INSIDER TRADING AND SUBSTANTIAL
ACQUISITON OF SECURITIES OR CONTROL Prohibition of manipulative and
deceptive devices, insider trading and substantial acquisition of securities or
control. 12A. No person shall directly or indirectly (a)
use or employ, in connection with the issue, purchase or sale of any securities
listed or proposed to be listed on a recognized stock exchange, any
manipulative or deceptive device or contrivance in contravention of the
provisions of this Act or the rules or the regulations made thereunder; (b)
employ any device, scheme or artifice to defraud in connection with issue or
dealing in securities which are listed or proposed to be listed on a recognized
stock exchange; (c) engage
in any act, practice, course of business which operates or would operate as
fraud or deceit upon any person, in connection with the issue, dealing in
securities which are listed or proposed to be listed on a recognized stock
exchange, in contravention of the provisions of this Act or the rules or the
regulations made thereunder; (d) engage
in insider trading; (e) deal in
securities while in possession of material or non-public information or
communicate such material or non-public information to any other person, in a
manner which is in contravention of the provisions of this Act or the rules or
the regulations made thereunder; (f)acquire
control of any company or securities more than the percentage of equity share capital
of a company whose securities are listed or proposed to be listed on a
recognized stock exchange in contravention of the regulations made under this
Act.] FINANCE,
ACCOUNTS AND AUDIT Grants by the Central Government. 13. The Central Government may, after due
appropriation made by Parliament by law in this behalf, make to the Board
grants of such sums of money as that Government may think fit for being utilised
for the purposes of this Act. Fund. 14. (1) There shall be constituted a
Fund to be called the Securities and Exchange Board of India General Fund and
there shall be credited thereto- (a) all
grants, fees and charges received by the Board under this Act; [33][***] [34][***] (b) all sums
received by the Board from such other sources as may be decided upon by the
Central Government.
(2) The Fund shall be applied for meeting - (a) the
salaries, allowances and other remuneration of members, officers and other
employees of the Board; (b) the
expenses of the Board in the discharge of its functions under section 11;
(c) the
expenses on objects and for purposes authorised by this Act. Accounts and Audit. 15. (1) The Board shall maintain
proper accounts and other relevant records and prepare an annual statement of
accounts in such form as may be prescribed by the Central Government in
consultation with the Comptroller and Auditor- General of India. (2) The accounts of the Board shall be audited by the
Comptroller and Auditor-General of India at such intervals as may be specified
by him and any expenditure incurred in connection with such audit shall be
payable by the Board to the Comptroller and Auditor-General of India.
(3) The Comptroller and Auditor-General of India and any other person appointed
by him in connection with the audit of the accounts of the Board shall have the
same rights and privileges and authority in connection with such audit as the
Comptroller and Auditor-General generally has in connection with the audit of
the Government accounts and, in particular, shall have the right to demand the
production of books, accounts, connected vouchers and other documents and
papers and to inspect any of the offices of the Board.
(4) The accounts of the Board as certified by the Comptroller and Auditor-General
of India or any other person appointed by him in this behalf together with the
audit report thereon shall be forwarded annually to the Central Government and
that Government shall cause the same to be laid before each House of
Parliament. [35][CHAPTER
VIA PENALTIES
AND ADJUDICATION 15A. Penalty for failure to
furnish information, return, etc.- If any person, who is required under this Act or any rules
or regulations made thereunder,- (a) to
furnish any document, return or report to the Board, fails to furnish the same,
he shall be liable to [36][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less]; (b) to file any return or furnish
any information, books or other documents within the time specified therefor in
the regulations, fails to file return or furnish the same within the time
specified therefor in the regulations, he shall be liable to [37][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less]; (c) to maintain books of accounts or
records, fails to maintain the same, he shall be liable to [38][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less.] 15B. Penalty for failure by any person to enter
into an agreement with clients.- If any person, who is registered as an intermediary and is
required under this Act or any rules or regulations made thereunder to enter
into an agreement with his client, fails to enter into such agreement, he shall
be liable to [39][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less.] 15C.Penalty for failure to
redress investors' grievances.- [40][If
any listed company or any person who is registered as an intermediary, after
having been called upon by the Board in writing, to redress the grievances of
investors, fails to redress such grievances within the time specified by the
Board, such company or intermediary shall be liable to a penalty of one lakh
rupees for each day during which such failure continues or one crore rupees,
whichever is less.] 15D.Penalty for certain defaults
in case of mutual funds.-If any person, who is - (a) required under this Act or any
rules or regulations made thereunder to obtain a certificate of registration
from the Board for sponsoring or carrying on any collective investment scheme,
including mutual funds, sponsors or carries on any collective investment
scheme, including mutual funds, without obtaining such certificate of
registration, he shall be liable to [41][a
penalty of one lakh rupees for each day during which he sponsors or carries on
any such collective investment scheme including mutual funds, or one crore
rupees, whichever is less.] (b) registered with the Board as a
collective investment scheme, including mutual funds, for sponsoring or
carrying on any investment scheme, fails to comply with the terms and
conditions of certificate of registration, he shall be liable to [42][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less.] (c) registered with the Board as a
collective investment scheme, including mutual funds, fails to make an
application for listing of its schemes as provided for in the regulations
governing such listing, he shall be liable to [43][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees , whichever is less.] (d) registered as a collective
investment scheme including mutual funds fails to despatch unit certificates of
any scheme in the manner provided in the regulation governing such despatch, he
shall be liable to [44][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less.] (e) registered as a collective
investment scheme, including mutual funds, fails to refund the application monies
paid by the investors within the period specified in the regulations, he shall
be liable to pay [45][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less.] (f) registered as a collective
investment scheme, including mutual funds, fails to invest money collected by
such collective investment schemes in the manner or within the period specified
in the regulations, he shall be liable to [46][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less.] 15E. Penalty
for failure to observe rules and regulations by an asset management company.-
Where any asset
management company of a mutual fund registered under this Act, fails to comply
with any of the regulations providing for restrictions on the activities of the
asset management companies, such asset management company shall be liable to [47][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less.] 15F. Penalty
for failure in case of stock brokers.- If any person, who is registered as a stock broker
under this Act, - (a) fails to issue contract notes in the form and in the
manner specified by the stock exchange of which such broker is a member, he
shall be liable to a penalty not exceeding five times the amount for which the
contract note was required to be issued by that broker; (b) fails
to deliver any security or fails to make payment of the amount due to the
investor in the manner within the period
specified in the regulations, he shall be liable to [48][a
penalty of one lakh rupees for each day during which such failure continues or
one crore rupees, whichever is less.] (c) charges
an amount of brokerage which is in excess of the brokerage specified in the
regulations, he shall be liable to [49][a
penalty of one lakh rupees] or five
times the amount of brokerage charged in excess of the specified brokerage,
whichever is higher. 15G.Penalty
for insider trading.- If any insider who,- (i) either on his own behalf or on
behalf of any other person, deals in securities of a body corporate listed on
any stock exchange on the basis of any unpublished price sensitive information;
or (ii)
communicates any unpublished price- sensitive information to any person, with
or without his request for such information except as required in the ordinary
course of business or under any law; or (iii)
counsels, or procures for any other person to deal in any securities of any
body corporate on the basis of unpublished price-sensitive information, shall be
liable to a penalty [50][of
twenty-five crore rupees or three times the amount of profits made out of
insider trading, whichever is higher.] 15H.Penalty
for non-disclosure of acquisition of shares and take-overs.-If any person, who is required under
this Act or any rules or regulations made thereunder, fails to,- (i) disclose the aggregate of his
shareholding in the body corporate before he acquires any shares of that body
corporate; or (ii) make a
public announcement to acquire shares at a minimum price; [51][(iii) make a public offer by
sending letter of offer to the shareholders of the concerned company; or (iv) make
payment of consideration to the shareholders who sold their shares pursuant to
letter of offer.] he shall be
liable to a penalty [52][
twenty-five crore rupees or three times the amount of profits made out of such
failure, whichever is higher.] [53][15HA.Penalty for fraudulent and
unfair trade practices.- If any person indulges in fraudulent and unfair trade
practices relating to securities, he shall be liable to a penalty of
twenty-five crore rupees or three times the amount of profits made out of such
practices, whichever is higher. 15HB.Penalty for contravention
where no separate penalty has been provided.- Whoever fails to comply with any
provision of this Act, the rules or the regulations made or directions issued
by the Board thereunder for which no separate penalty has been provided, shall
be liable to a penalty which may extend to one crore rupees.] (2) While holding an inquiry, the adjudicating officer
shall have power to summon and enforce the attendance of any person acquainted
with the facts and circumstances of the case to give evidence or to produce any
document which in the opinion of the adjudicating officer, may be useful for or
relevant to the subject matter of the inquiry and if, on such inquiry, he is
satisfied that the person has failed to comply with the provisions of any of
the sections specified in sub-section (1), he may impose such penalty as he
thinks fit in accordance with the provisions of any of those sections. 15J.Factors to be taken into
account by the adjudicating officer.-While adjudging quantum of penalty under section 15,
the adjudicating officer shall have due regard to the following factors,
namely: (a) the
amount of disproportionate gain or unfair advantage, wherever quantifiable,
made as a result of the default; (b) the
amount of loss caused to an investor or group of investors as a result of the
default; (c) the
repetitive nature of the default. [55][15JA.Crediting sums realized by way of penalties to Consolidated
Fund of India.- All sums realised by way of penalties
under this Act shall be credited to the Consolidated Fund of India.] ESTABLISHMENT,
JURISDICTION, AUTHORITY AND PROCEDURE OF APPELLATE TRIBUNAL | |