SECURITIES CONTRACT REGULATIONS ACT,1956 1

• SECURITIES LAWS AND CAPITAL MARKETS
  SECURITIES CONTRACT REGULATIONS ACT,1956

• INTRODUCTION

1. THE SECURITIES CONTRACT ( REGULATIONS ) ACT PROVIDE FOR DIRECT AND INDIRECT CONTROL OF ALL ASPECTS OF THE SECURITIES TRADES INCLUDING THE RUNNING OF STOCK EXCHANGE WHICH AIMS TO PREVENT UNDESIRABLE TRANSACTION IN  SECURITIES BY REGULATING THE BUSINESS OF DEALING THEREIN.
2. THE SECURITIES CONTRACT ( REGULATIONS ) ACT GIVES POWERS TO CENTRAL GOVERNMENT BUT MOST OF THE POWERS HAVE BEEN DELEGATED TO SEBI

• THE SECURITIES CONTRACT REGULATION RULES 1957:

1. PROCEDURE TO BE FOLLOWED FOR RECOGNITION OF STOCK EXCHANGE
2. SUBMISSION OF PERIODICAL REPORTS
3. ANNUAL REPORTS BY RECOGNIZED STOCK EXCHANGE
4. INQUIRY INTO THE AFFAIRS OF STOCK EXCHANGE AND THEIR MEMBERS
5. CONSTITUTING A STANDARD CODE FOR REGULATIONS
6. LISTING OF SECURITIES

• SECURITIES CONTRACT
  ( REGULATION ACT ) 1956

1. EXTENDS TO THE WHOLE OF INDIA AND CAME INTO FORCE ON 20 TH FEB,1957
2. MOST OF THE POWERS ARE EXERCISABLE BY DEPARTMENT OF AFFAIRS
3. FEW BY SEBI
4. THE POWERS OF DEA ARE CURRENTLY EXERCISED BY SEBI

• OBJECTS OF THE SCRA

1. TO PROVIDE FOR THE REGULATION OF STOCK EXCHANGE
2. TO PROVIDE FOR THE REGULATIONS OF TRANSACTIONS IN SECURITIES
3. TO PREVENT UNDESIRABLE SPECULATION IN SECURITIES
4. TO REGULATE THE BUYING AND SELLING OF SECURITIES  OUTSIDE THE LIMITS OF STOCK EXCHANGE
5. TO PROVIDE FOR THE ANCILLARY MATTERS LIKE PROMOTING HEALTHY STOCK EXCHANGE

• NON APPLICABILITY
• SECTION 28(1) DOES NOT APPLY:

1. THE GOVERNMENT
2. THE RBI
3. ANY LOCAL AUTHORITY
4. ANY CORPORATION SET UP BY SPECIAL LAW LIKE IFCI SET BY SPECIAL STATUTE
5. OR AN PERSON WHO HAS EFFECTED ANY TRANSACTION WITH OR THROUGH THE AGENCY OF ANY SUCH AUTHORITY MENTIONED ABOVE
6. ANY CONVERTIBLE BOND OR SHARE WARRANT OR ANY OPTION OR RIGHT IN RELATION THERETO,INSOFAR AS IT ENTITLES THE PERSON TO OBTAIN ANY BENEFIT

• POWER OF THE CENTRAL GOVERNMENT TO EXEMPT 28(2)

1. BY NOTIFICATION IN THE OFFICIAL GAZETTE SPECIFY ANY CLASS OF CONTRACTS TO WHICH ANY OR ALL PROVISIONS OF THE ACT SHALL NOT APPLY
2. ALSO SPECIFY :

1. CONDITIONS
2. LIMITATIONS
3. OR RESTRICTIONS SUBJECT TO WHICH THE PROVISIONS OF THE ACT SHALL APPLY

• DEFINITIONS
• SECURITIES ( SECTION 2h) INCLUDE:-

a)    SHARES,SCRIPS,BONDS,DEBENTURES,DEBENTURE STOCK OR OTHER MARKETABLE SECURITIES OF LIKE NATURE IN OR OF ANY INCORPORATED COMPANY OR OTHER BODY CORPORATE

b)    DERIVATIVE

c)    UNITS OR ANY OTHER INSTRUMENTS ISSUED BY COLLECTIVE INVESTMENT SCHEME TO THE INVESTORS

d)    SECURITY RECEIPTS ( DEFINED BY 2(ZG) OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002

e)    UNITS OR ANY OTHER INSTRUMENTS ISSUED TO THE INVESTOR UNDER MUTUAL FUND SCHEME

f)     ANY CERTIFICATE OR INSTRUMENT ( BY WHAT EVER NAME CALLED ) ISSUED TO INVESTOR BY ANY ISSUER BEING SPECIAL PURPOSE DISTINCT ENTITY WHICH POSSESS ANY DEBT OR RECEIVABLE INCLUDING MORTGAGE DEBT,ASSIGNED TO SUCH ENTITY AND ACKNOWLEDGING BENEFICIAL INTEREST OF SUCH INVESTOR IN SUCH DEBT OR RECEIVABLE INCLUDING MORTGAGE DEBT AS THE CASE MAY BE

g)    GOVERNMENT SECURITIES

h)    SUCH OTHER INSTRUMENTS AS MAY BE DECLARED BY THE CENTRAL GOVERNMENT TO BE SECURITIES

i)      RIGHT OF INTEREST IN SECURITIES

• CORPORATISATION ( SECTION 2(aa):MEANS THE SUCCESSION OF RECOGNIZED STOCK EXCHANGE BEING A BODY OF INDIVIDUALS OR A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860 BY ANOTHER STOCK EXCHANGE,BEING A  COMPANY INCORPORATED FOR THE PURPOSE OF ASSISTING,REGULATING OR CONTROLLING THE BUSINESS OF BUYING AND SELLING OR DEALING IN SECURITIES CARRIED ON BY SUCH INDIVIDUALS OR SOCIETY.
• DEMUTUALISATION ( SECTION 2(ab) :-MEANS THE SEGREGATION OF OWNERSHIP AND MANAGEMENT FROM THE TRADING RIGHTS OF A RECOGNIZED STOCK EXCHANGE IN ACCORDANCE WITH A SCHEME APPROVED BY SEBI
• DEMUTALISATION
• EARLIER EXCEPT NSE AND OTCEI MOST OF THE STOCK EXCHANGE WERE FORMED AS MUTUAL ORGANIZATION MEANS FORMED BY TRADING MEMBERS FOR THEIR COMMON BENEFIT
• THE MAIN LIMITATION WAS THAT THEY PRIMARILY WORK FOR INTERESTS OF THE MEMBERS AND THOSE OF THE INVESTORS

1. THERE WAS NO TRANSPARENCY AND NO PROFESSIONAL APPROACH AND MORE FUNDS CAN NOT BE RAISED
2. THE OFFICE BEARER WILL HAVE ACCESS TO INSIDE INFORMATION WHICH CAN BE MISUSED BY THEM
3. THE GOVERNMENT OF INDIA CORPORATIZED STOCK EXCHANGE WHICH MEANS COMPANY SHOULD BE ORGANIZED AS COMPANY
4. PROCESS OF CONVERTING MUTUAL STOCK EXCHANGE INTO COMPANY IS KNOWN AS DEMUTALISATION OF STOCK EXCHANGE

• PROCEDURE ( SECTION 4B)

1. SECTION 4 A : EVERY STOCK EXCHANGE SHALL BE CORPORATISED AND DEMUTALISED BEFORE APPOINTED DATE
2. ALL RECOGNIZED STOCK EXCHANGES WHICH HAS NOT BEEN CORPORATISED ARE REQUIRED TO SUBMIT A SCHEME  WITH IN TIME SPECIFIED BY SEBI
3. MAY  APPROVE THE SCHEME WITH OR WITHOUT MODIFICATION
4. SHALL BE PUBLISHED IMMEDIATELY BY SEBI IN THE OFFICIAL GAZETTE AND IN TWO DAILY NEWSPAPERS CIRCULATING IN INDIA
5. WHILE APPROVING THE SCHEME: SEBI MAY RESTRICT:-
6. THE VOTING RIGHTS OF THE SHAREHOLDERS WHO ARE STOCK BROKERS
7. THE RIGHTS OF THE SHAREHOLDERS TO APPOINT THE REPRESENTATIVES ON THE GOVERNING BOARD OF STOCK EXCHANGE
8. THE MAXIMUM NUMBER OF REPRESENTATIVE OF THE STOCK EXCHANGE WHICH SHALL NOT EXCEED ¼ OF THE TOTAL STRENGTH OF THE GOVERNING BODY

9. SEBI MAY REJECT THE SCHEME NOT IN THE INTEREST OF THE TRADE BUT SUCH REJECTION SHALL BE PUBLISHED BY IT IN THE OFFICIAL GAZETTE
10. ON THE PUBLICATION IN THE OFFICIAL GAZETTE IT SHALL HAVE FULL EFFECT
11. EVERY RECOGNIZED STOCK EXCHANGE SHALL ENSURE THAT AT LEAST 51% OF ITS EQUITY SHARE CAPITAL SHALL BE HELD WITH IN 51% WITH IN 12 MONTHS FROM THE DATE OF PUBLICATION OF THE ORDER BY THE PUBLIC OTHER THAN SHAREHOLDERS HAVING TRADING RIGHTS