Insider Trading In Stock Markets And Sebi.

10058 words - 40 pages

CORPORATE FINANCEPROJECTONINSIDER TRADING&THE SECURITIES AND EXCHANGE BOARD OF INDIABYANUJ N SEHGALCONTENTSI.Emergence of The Securities Exchange Board Of IndiaII.Legal status of The Securities Exchange Board Of IndiaIII.ObjectivesIV.Salient features of the SEBI Act, 1992V.Powers and Functions of the Securities Exchange Board Of IndiaVI.Insider TradingIntroductionProtection under General LawInsider Trading Law in IndiaInsider Trading Law in USVII.CaseIntroductionStatutory AnalysisJudicial AnalysisFinal JudgementVIII.ConclusionIX.BibliographyEMERGENCE OF SEBIThe ever expanding investors' population and market capitalization led to a variety of malpractices on the part of companies, brokers, merchant bankers, investment consultants and others involved in new issues and stock in India.The glaring examples of these malpractices are as under:a)Existence of self-styled merchant bankers, investment consultants without sufficient expertise and infrastructure for proper services.b)Unofficial private placements.c)Rigging of prices just before public issue to bolster the image of the company in the eyes of prospective investors.d)Unofficial premiums on new issues.e)Manipulations of prices even before listing.f)Allotments with or without premium to the favoured persons.g)Delays in finalizing the allotments and dispatch of allotment letters and refund orders before the due date.h)Non-adherence of provisions of the Companies Act and other relevant Acts.i)Violation of rules and regulations of the stock exchanges and listing requirements.j)Absence of fair practices in trading in the market such as rigging of shares, manipulation of prices, insider trading and a large spread between the bid and offer prices.k)Delay in delivery of shares and in making payments for sales by the brokers to their customers.l)Problem of odd lots and poor liquidity of a number of shares in the secondary market.m)Diversion of funds of the mega issues for a purpose other than intended such as takeover bids of other companies, acquisition of shares or investments of other companies and for working capital.The malpractices and unfair trading practices have eroded investor's confidence. It multiplied the investor's grievances. The Government and the Stock Exchanges were rather helpless in redressing the investor's problems because of lack of proper penal provisions in the existing legislation.Realizing this, SEBI was constituted by the Government in April 1988 as a supervisory body to regulate and promote the securities market.LEGAL STATUS OF SEBIInitially, SEBI was established as an interim body under the administrative control of the Finance Ministry. Recently it was given statutory powers. These statutory powers were conferred on SEBI vide the Securities and Exchange Board of India Ordinance, 1992. The Ordinance was later on replaced by an Act of Parliament known as the Securities and Exchange Board of India Act, 1992.The preamble to the SEBI Act provides for the establishment of a...

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