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CONTENTS
THE GAZETTE OF
INDIA SECURITIES AND EXCHANGE
BOARD OF INDIA SEBI/LE/856(E) In exercise of
the powers conferred by section 30 of The Securities and Exchange Board of
India, Act 1992 (15 of 1992), the Board hereby makes the following regulations,
namely: -
1. (1) These regulations may be
called the Securities and Exchange Board of India (Prohibition of Fraudulent and
Unfair Trade Practices relating to Securities Markets) Regulations,
1995.
(2) They shall come into force
on the date of their publication in the Official Gazette.
2.(1) In these regulations,
unless the context otherwise requires -
(b) "dealing in securities"
means an act of buying, selling or otherwise dealing in any security or
agreeing to buy, sell or otherwise deal in any security by any person either
as principal or as agent;
(c) "fraud" includes any of
the following acts committed by a party to a contract, or with his connivance,
or by his agent, with intent to deceive another party thereto or his agent, or
to induce him to enter into the contract:-
(2) the active concealment
of a fact by one having knowledge or belief of the fact;
(3) a promise made without
any intention of performing it;
(4) any other act fitted to
deceive;
(5) any such act or
omission as the law specially declares to be fraudulent;
and "fraudulent" shall be
construed accordingly. (e) "regulation" means a
regulation contained in these regulations; and
(f) "securities" means
securities as defined in section 2 of the Securities Contracts (Regulation)
Act, 1956.
CHAPTER II
Prohibition of certain dealings in securities
3. No person shall buy, sell or
otherwise deal in securities in a fraudulent manner.
Prohibition against Market Manipulation
4. No person shall
-
(b) indulge in any act, which
is calculated to create a false or misleading appearance of trading on the
securities market;
(c) indulge in any act which
results in reflection of prices of securities based on transactions that are
not genuine trade transactions;
(d) enter into a purchase or
sale of any securities, not intended to effect transfer of beneficial
ownership but intended to operate only as a device to inflate, depress, or
cause fluctuations in the market price of securities;
(e) pay, offer or agree to
pay or offer, directly or indirectly, to any person any money or money's worth
for inducing another person to purchase or sell any security with the sole
object of inflating, depressing, or causing fluctuations in the market price
of securities. 5. (1) No person shall make any
statement, or disseminate any information which -
(b) is likely to induce the
sale or purchase of securities by any other person or is likely to have the
effect of increasing or depressing the market price of securities, if when he
makes the statement or disseminates the information-
(ii) he knows, or ought
reasonably to have known that the statement or information is misleading in
any material particular. (b) the economic situation in
the country,
(c) trends in the securities
markets, or
(d) any other matter of a
similar nature,
whether such comments be made
in public or in private. 6. No person shall
-
(b) on his own behalf or on
behalf of any person, knowingly buy, sell or otherwise deal in securities,
pending the execution of any order of his client relating to the same security
for purchase, sale or other dealings in respect of securities.
Nothing contained in this
clause shall apply where according to the clients instruction, the transaction
for the client is to be effected only under specified conditions or in
specified circumstances;
(c) intentionally and in
contravention of any law for the time being in force delays the transfer of
securities in the name of the transferee or the despatch of securities or
connected documents to any transferee;
(d) indulge in falsification
of the books, accounts and records (whether maintained manually or in computer
or in any other form);
(e) when acting as an agent,
execute a transaction with a client at a price other than the price at which
the transaction was executed by him, whether on a stock exchange or otherwise,
or at a price other than the price at which it was offset against the
transaction of another client. Power of
the Board to order investigation
7. (1) The Board may, suo-motu
or upon information received by it, cause an investigation to be made in respect
of the conduct and affairs of any person buying, selling or otherwise dealing in
securities, by an investigating officer whom the Board considers
fit.
Provided that no such
investigation shall be made except for the purposes specified in sub-regulation
(2).
(2) The
purposes referred to in sub-regulation (1) are the
following, namely-
(b) to investigate into any
complaint of any contravention of the regulation, received from any investor,
intermediary or any other person; 8. (1) Before causing an
investigation to be made under regulation 7, the Board
shall give notice.
(2) Notwithstanding anything
contained in sub-regulation
(1), where the Board is satisfied that in the interest of the investors or
in the public interest, no such notice should be given, it may, by an order in
writing and recording the reasons as far as practicable, direct that the
investigation be undertaken without such notice.
(3) Subject to the provisions
of this regulation, an order passed under regulation 7 shall be a
sufficient authority for the Investigating Officer to undertake the
investigation and, on production of an authenticated copy of the order, the
person concerned shall be bound to carry out the duty imposed in regulation
9.
9. (1) It shall be the duty of
every person in respect of whom an investigation has been ordered under
regulation 8 to produce to the Investigating Officer such books, accounts and
other documents in his custody or control and furnish him with such statements
and information as the said officer may reasonably require for the purposes of
the investigation.
(2) Without prejudice to the
generality of the provisions of sub-regulation (1), such
person shall -
(b) extend to the
Investigating Officer reasonable facilities for examining any books, accounts
and other documents in his custody or control (whether kept manually or in
computer or in any other form) reasonably required for the purposes of the
investigation;
(c) provide to such
Investigating Officer copies of any such books, accounts and records which, in
the opinion of the Investigating Officer, are relevant to the investigation
or, as the case may be, allow him to take out computer outprints
thereof. (4) It shall be the duty of
every person concerned, to give to the Investigating Officer, all such
assistance and otherwise extend all such co- operation as may reasonably be
required in connection with the investigation and to furnish information
relevant to such investigation as may be reasonably sought by such
officer.
Submission of Report to the Board
10. The Investigating Officer
shall, on completion of the investigation, after taking into account all
relevant facts and submissions made by the person concerned, submit a report to
the Board.
Power
of the Board to issue directions
11. The Board may, after
consideration of the report referred to in regulation 10 and after
giving reasonable a opportunity of hearing to the person concerned, issue
directions for ensuring due compliance with the provisions of the Act, rules and
regulations made thereunder, for the purposes specified in regulation
8.
12. The purposes for which
directions under regulation 11 may be
issued are the following, namely -
(b) requiring the person
concerned to call upon any of its officers, other employees or representatives
to refrain from dealing in securities in any particular manner;
(c) prohibiting the person
concerned from disposing of any of the securities acquired in contravention of
these regulations;
(d) directing the person
concerned to dispose of any such securities acquired in contravention of these
regulations, in such manner as the Board may deem fit, for restoring the
status-quo ante. 13. The Board may, in the
circumstances specified in regulation 11, and
without prejudice to its power under regulation 12, initiate
action for suspension or cancellation of registration of an intermediary holding
a certificate of registration under section 12 of the Act.
Provided that no such
certificate of registration shall be suspended or cancelled unless the procedure
specified in the regulation applicable to such intermediary is complied
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