SEBI Act, 1992

The SEBI Act gives SEBI quasi-legislative, quasi-judicial, and executive powers to regulate India's securities market.

Key Sections for Exam

  • Section 11: SEBI's general powers — protecting investor interest, promoting orderly development, regulating markets
  • Section 11A: Power to regulate matters relating to issue of capital, transfer, and disclosure
  • Section 11B: SEBI can give directions to any person — stop trading, freeze assets
  • Section 12: No person can act as intermediary without SEBI certificate of registration
  • Section 12A: Prohibition on: fraudulent transactions, market manipulation, insider trading, front-running
  • Section 15: Penalties for non-compliance — up to ₹25 crore or 3× profits
  • Section 15Z: Securities Appellate Tribunal (SAT) — appeals against SEBI orders go to SAT, then Supreme Court

Securities Contracts (Regulation) Act, 1956 (SC(R)A)

  • Defines 'securities' (includes derivatives since 1999 amendment)
  • Section 2(h): Definition of 'securities' — shares, bonds, debentures, rights, derivatives, units of collective investment schemes
  • Section 18A: Derivatives contracts are legal and enforceable contracts (added 1999)
  • Section 23: Penalties for insider trading offences under SC(R)A
  • Stock exchanges are recognised under SC(R)A Section 4

SEBI Takeover Code (SAST Regulations, 2011)

Governs acquisition of shares and control in listed Indian companies.

  • 25% trigger: Acquiring 25% or more of voting rights in a listed company triggers mandatory open offer
  • Creeping acquisition: Existing holders of 25–75% can buy up to 5% additional per financial year without triggering open offer
  • Open offer size: Acquirer must make an open offer for at least 26% of total shares from public shareholders
  • Open offer price: Higher of: (i) Volume-weighted average price in last 60 trading days, (ii) Highest price paid in last 26 weeks, (iii) NAV (for non-listed acquiree)
  • Indirect acquisition: Acquiring control of a company that holds >25% in a listed company also triggers open offer

SEBI (Prohibition of Insider Trading) Regulations, 2015

  • UPSI (Unpublished Price Sensitive Information): Financial results, dividends, mergers/acquisitions, board changes, major contracts, regulatory actions — before public announcement
  • Insider: Any person in possession of UPSI — not just management but also connected persons who receive UPSI
  • Trading Plan: An insider can pre-declare a trading plan 6 months in advance (not during closed window) — creates a safe harbour
  • Closed Window: 48 hours before and until 24 hours after announcement of financial results
  • Structured Digital Database (SDD): All companies must maintain a digital database of UPSI recipients

SEBI ICDR Regulations, 2018 (Issue of Capital)

  • IPO Eligibility (Main Board): 3 years net tangible assets ≥ ₹3 crore, OR QIB route (no profitability track record needed)
  • QIB Allocation: ≥75% of issue reserved for QIBs in book-build issues
  • Price Band: In book-build, cap price ≤ 120% of floor price
  • Allotment: If oversubscribed in retail category, lottery system; in QIB, pro-rata
  • Lock-in: Promoters' pre-issue shares locked in for 3 years (18 months from Apr 2022 for up to 20% stake)