ROLE OF SEBI - Accounts and Finance for Managers

  • Entry norms for the companies at the moment of raising the capital from the market:

The companies are expected to produce 3 years dividend track record of preceding the issue.
At the entry level, immediately after listing, important point to be ensured is that Post issue of networth should be 5 times greater than the Pre issue networth.
If it is a manufacturing company without any track record, wants to raise any capital from the market, the appraisal has to be done through development banks or commercial banks.
Having three years track record, the SEBI never vets offer document of the issue of capital.

Promoter's Contribution

  • Promoter's contribution should not be less than 20% and should be made before the issue.
  • If the size of the issues is Rs. 100 cr -50% of the contribution should be made before the opening of issue and the remaining should be paid before the calls are made to the investors.


  • Acc.Bhave committee- Financial results i.e., unaudited and audited financial results should be published.
  • Risk factors and positions of the company should be highlighted in detail in the prospectus .

Book Building

  • 75% route was specified at the early moment in the process of book building. Then the book building process was opened to 100% route to the public.
  • Sufficient opportunities are to be furnished to the investors to represent through the terminal to take part in the process of Book building.
  • The company during the process requires 30 centers atleast for book building process to raise the share capital from the market.

Allocation of Shares

  • The Minimum application was -100 Nos for subscribing the issue of share capital. Then the Minimum application was hiked to 500 Nos. Then SEBI has felt that the Minimum application was too high, which did not pave the small investors to within the available surplus, then the minimum application brought down to 200 Nos.
  • Small investors are who hold 1000 shares or few securities
  • Allotment should be done within 30 days from the date of closure of the issue. During the non allotment of the shares, the company should refund the amount of the application money.

Market Intermediaries

  • The various merchant bank categories were abolished. Each category of issue intermediary is required to undergo for specific registration process.
  • Lead managers who manage the issue of capital should have a networth of Rs.5 cr.

Debt Market Segment

  • Depository system for the debt securities were introduced
  • Demat facility was specifically introduced for the government securities
  • Listing of debt securities need not rely upon the equity listing in the respective stock exchange
  • FIIs were permitted to invest 100% in the debt instruments of the Indian companies
  • For the issuance of debt instruments the rating has been mandatory
  • Minimum two ratings should be obtained for the issue of debt instrument more than Rs. 500 cr.
  • Rating agency should not be associated with the firm of issuing company


  • Registration is given - Member of any stock exchange - key factors of registration - office space, previous experience, man power, selling or buying in securities
  • Code of conduct-execution of orders, fairness of deals with the investors, issue of contract note
  • Financial statements - should be submitted within 6 months of the accounting period
  • Book of accounts - A minimum of 5 years to be preserved
  • Regional offices - Establishment only with reference to attend the complaints of the small investors at speedy rate - Kolkata, Chennai and Delhi
  • SEBI's final controlling measure is suspension and cancellation of the registration subject to certain conditions

Suspension of a Broker

  • Suspension - permanent - dismissal is leading to cancellation of registration - due to the problem caused
  • Violation of rules and regulations
  • Fails to submit the true and fair information according to the norms of disclosures
  • Untoward conduct with the investor
  • Guilt of misconduct
  • Poor financial status of the brokers-deterioration
  • Stock exchange fees - fail to pay on time to the requirement
  • Suspension of the membership
  • Indulges in any act of insider trading of securities
  • Convicted of a any criminal offence
  • Sub-Broker
  • Sub- broker- to obtain the registration
  • Agreement in between broker & sub-broker
  • Deposit should be made with - Broker
  • Transfer of securities - without registration of bearing stamps - considered as bad deliveries in the angle of stock exchanges -July 1,1997.

Recent Developments

  • RBI approval copy is exempted
  • FIIs are permitted to invest upto 100% in debt market funds
  • FIIs which have securities worth of Rs 100 cr or more than mandatory requirement is to settle the transaction only through demat mode
  • FIIs/NRIs/OCB -30% of the equity of the company in accordance with the union budget - 1997-98
  • It was hiked by the Union Finance Minister during the budget 2000

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