The Securities and Exchange Board Of India Act, 1992
NO.15 OF 1992
[4th April, 1992]
An Act to
provide for the establishment of a Board to protect the interests of
investors in securities and to promote the development of, and to
regulate, the securities market and for matters connected therewith
or incidental thereto.
BE it enacted by Parliament in the
Forty-third Year of the Republic of India as follows:-
Comment: This Act
inter-alia seeks to provide a legal framework to protect the
interests of investors etc.
CHAPTER I
PRELIMINARY
1.Short title, extent and
commencement.- (1) This Act may be called the Securities and
Exchange Board of India Act, 1992.
(2) It extents to the
whole of India.
(3) It shall be deemed to have come into
force on the 30th day of January, 1992.
2.Definitions.- (1) In this
Act, unless the context otherwise requires,-
(a) "Board"
means the Securities and Exchange Board of India established under
section 3;
(b) "Chairman" means the Chairman of the
Board;
(c) "existing Securities and Exchange Board" means the
Securities and Exchange Board of India constituted under the
Resolution of the Government of India in the Department of Economic
Affairs No.(44) SE/86, dated the 12th day of April, 1988;
(d)
"Fund" means the Fund constituted under section 14;
(e)
"member" means a member of the Board and includes the
Chairman;
(f) "notification" means a notification published
in the Official Gazette;
(g) "prescribed" means prescribed by
rules under this Act;
(h) "regulations" means the regulations
made by the Board under this Act;
(i) "securities " has the
meaning assigned to it in section 2 of the Securities Contracts
(Regulation) Act, 1956 (42 of 1956).
(2) Words and
expressions used and not defined in this Act but defined in the
Capital Issues (Control) Act, 1947, (29 of 1947) or the Securities
Contracts (Regulation) Act, 1956, (42 of 1956) shall have the
meanings respectively assigned to them in those Acts.
CHAPTER II
ESTABLISHMENT OF THE SECURITIES
AND EXCHANGE BOARD OF INDIA
3.Establishment and
incorporation of Board.- (1) With effect from such date as the
Central Government may, by notification, appoint, there shall be
established, for the purposes of this Act, a Board by the name of
the Securities and Exchange Board of India.
(2) The Board
shall be a body corporate by the name aforesaid, having perpetual
succession and a common seal, with power subject to the provisions
of this Act, to acquire, hold and dispose of property, both movable
and immovable, and to contract, and shall, by the said name, sue or
be sued.
(3) The head office of the Board shall be at
Bombay.
(4) The Board may establish offices at other places
in India.
4.Management of the Board.-
(1) The Board shall consist of the following members,
namely:--
(a) a Chairman;
(b) two members form amongst
the officials of the Ministries of the Central Government dealing
with Finance and Law;
(c) one member form amongst the
officials of the Reserve Bank of India constituted under section 3
of the Reserve Bank of India Act, 1934 (2 of 1934);
(d) two
other members,
to be appointed by the Central
Government.
(2) The genial superintendence, direction and
management of he affairs of the Board shall vest in a Board of
members, which may exercise all powers and do all acts and things
which may be exercised or done by the Board.
(3) Save as
otherwise determined by regulations, the Chairman shall also have
powers of general superintendence and direction of the affairs of
the Board and may also exercise all powers and do all acts and
things which may be exercised or done by that Board.
(4) The
Chairman and members referred to in clauses (a) and (d) of
sub-section (1) shall be appointed by the Central Government and the
members referred to in clauses (b) and (c) of that sub-section shall
be nominated by the Central Government and the Reserve Bank of India
respectively.
(5) The Chairman and the other members referred
to in clauses (a) and (d) of sub-section (1) shall be persons of
ability, integrity and standing who have shown capacity in dealing
with problems relating to securities market or haven special
knowledge or experience of law, finance, economics, accountancy,
administration or in any other discipline which, in the opinion of
the Central Government, shall be useful to the Board.
5.Term of office and conditions
of service of Chairman and members of the Board.- (1) The term
of officer and other condition of service of the Chairman and the
members referred to in clause (d) of sub-section (1) of section 4
shall be such as may be prescribed.
(2) Notwithstanding
anything contained in sub-section (1), the Central Government shall
have the right to terminate the services of the Chairman or a member
appointed under clause (d) of sub-section (1) of section 4, at any
time before the expire of the period prescribed under sub-section
(1), by giving him notice of not less than three months in writing
or three months' salary and allowances in lieu thereof, and the
Chairman or a member, as the case may be, shall also have the right
to relinquish his office, at any time before the expire of the
period prescribed under sub-section (1), by giving to the Central
Government notice of not less than three months in
writing.
6.Removal of
member from office.- (1) The Central Government shall remove a
member from office if he-
(a) is, or at any time has been,
adjudicated as insolvent;
(b) is of unsound mind and stands
so declared by a competent court;
(c) has been convicted of
an offence which, in the opinion of the Central Government, involves
a moral turpitude;
(d) is appointed as a director of a
company;
(e) has, in the opinion of the Central Government,
so abused his position as to render his continuation in office
detrimental to the public interest:
Provided that no member
shall be removed under this clause unless he has been given a
reasonable opportunity of being heard in the matter.
7.Meetings.- (1) The Board
shall meet at such times and places, and shall observe such rules of
procedure in regard to the transaction of business at its meetings
(including quorum at such meetings) as may be regulation.
(2)
The Chairman or, if for any reason, he is unable to attend a meeting
of the Board, any other member chosen by the members present from
amongst themselves at the meeting shall preside at the
meeting.
(3) All questions which come up before any meeting
of the Board shall be decided by a majority votes of the members
present and voting, and, in the event of an equality of votes, the
Chairman, or in his absence, the person presiding, shall have a
second or casting vote.
8.Vacancies, etc., not to
invalidate proceedings of Board.- No act or proceeding of the
Board shall be invalid merely by reason of-
(a) any vacancy
in, or any defect in the constitution of, the
Board;
or
(b) any defect in the appointment of a person
acting as a member of the Board; or
(c) any irregularity in
the procedure of the Board not affecting the merits of the
case.
9.Officers and
employees of the Board.- The Board may appoint such other
officers and employees as it considers necessary for the efficient
discharge of its function under this Act.
(2) The term and
other conditions of service of officer and employees of the Board
appointed under sub-section (1) shall be such as may be determined
by regulations.
CHAPTER III
TRANSFER OF
ASSETS, LIABILITIES, ETC., OF THE EXISTING SECURITIES
AND
EXCHANGE BOARD TO THE BOARD
10.Transfer of assets,
liabilities, etc., of existing Securities and Exchange Board to the
Board.- (1) On and from the date of establishment of the
Board,-
(a) any reference to the existing Securities and
Exchange Board in any law other than this Act or in any contract or
other instrument shall be deemed as a reference to the
Board;
(b) all properties and assets, movable and immovable,
of, or belonging to, the existing Securities and Exchange Board,
shall vest in the Board;
(c) all rights and liabilities of
the existing Securities and Exchange Board shall be transferred to,
and the be rights and liabilities of, the Board;
(d) without
prejudice to the provisions of clause (c), all debts, obligations
and liabilities incurred, all contracts entered into and al matters
and things engaged to be done by, with or for the existing
Securities and Exchange Board immediately before that date, for or
in confection with the purpose of the said existing Board shall be
deemed to have been incurred, entered into or engaged to be done by,
with or for, the Board;
(e) all sums of money due to the
existing Securities and Exchange Board immediately before that date
shall be deemed to be due to the Board;
(f) all suits and
other legal proceedings instituted or which could have been
instituted by or against the existing Securities and Exchange Board
immediately before that date may be continued or may be instituted
by or against the Board; and
(g) every employee holding any
office under the existing Securities and Exchange Board immediately
before that date shall hold his office in the Board by the same
tenure and upon the same terms and conditions of service as respects
remuneration, leave, provident fund, retirement and other terminal
benefits as he would have held such office if the Board had not been
established and shall continue to do so as an employee of the Board
or until the expire of the period of six months from that date if
such employee opts not to be the employee of the Board within such
period.
(2) Notwithstanding anything contained in the
Industrial Disputes Act.1947, (14 of 1947) or in any other law for
the time being in force, absorption of any employee by the Board in
its regular service under this section shall not entitle such
employee to any compensation under that Act or other law and no such
claim shall be entertained by any court, tribunal or other
authority.
CHAPTER
IV
POWERS AND FUNCTIONS OF THE BOARD
11.Functions of
Board.- (1) Subject to the provisions of this Act, it shall be
the duty of the Board to protect the interests of investors in
securities and to promote the development of, and to regulate the
securities market, by such measures as it thinks fit.
(2)
Without prejudice to the generality of the foregoing provisions, the
measures referred to therein may provide for-
(a) regulating
the business in stock exchange and any other securities
markets;
(b) registering and regulating the working of stock
brokers, sub-brokers, share transfer agents, bankers to an issue,
trustees of trust deeds, registrars to an issue, merchant bankers,
underwriters, portfolio managers, investment advisers and such other
intermediaries who may be associated with securities markets in any
manner;
(c) registering and regulating the working of
collective investment schemes, including mutual funds;
(d)
promoting and regulating self-regulatory organizations;
(e)
prohibiting fraudulent and unfair trade practices relating to
securities markets;
(f) promoting investors' education and
training of intermediaries of securities markets;
(g)
prohibiting insider trading in securities;
(h) regulating
substantial acquisition of shares and take-over of
companies;
(i) calling for information from, undertaking
inspection, conducting inquiries and audits of the stock exchange
and intermediaries and self-regulatory organizations in the
securities market;
(j) performing such functions and
exercising such powers under the provision of the Capital Issues
(Control) Act, 1947 (29 of 1947) and the Securities Contracts
(Regulation) Act, 1956, (42 of 1956) as may be delegated to it by
the Central Government;
(k) levying fees or other charges for
carrying out the purposes of this section;
(l) conducting
research for the above purposes;
(m) performing such other
function as may be prescribed.
CHAPTER V
REGISTRATION
CERTIFICATE
12.Registration of stock-brokers, sub-brokers,
share transfer agents, etc.- (1) No stock-broker, sub-broker,
share transfer agent, banker to an issue, trustee of trust deed,
registrar to an issue, merchant banker, underwriter, portfolio
manager, investment adviser and such other intermediary who may be
associated with securities market shall buy, sell or deal in
securities except under, and in accordance with, the conditions of a
certificate of registration obtained from the Board in accordance
with the rules made under this Act:
Provided that a person
buying or selling securities or otherwise dealing with the
securities market as a stock-broker, sub-broker, share transfer
agent, banker to an issue, trustee of trust deed, registrar to an
issue, merchant banker, underwriter, portfolio manager, investment
adviser and such other intermediary who may be associated with
securities market immediately before the establishment of the Board
for which no registration certificate was necessary prior to such
establishment, may continue to do so for a period of three months
from such establishment or, if he has made an application for such
registration within the said period of three months, till the
disposal of such application.
(2) Every application for
registration shall be in such manner and on payment of such fees as
may be determined by regulations.
(3) The Board may, by
order, suspend or cancel a certificate of registration in such
manner as may be determined by regulations:
Provided that no
order under this sub-section shall be made unless the person
concerned has been given a reasonable opportunity of being
heard.
CHAPTER
VI
FINANCE, ACCOUNTS AND AUDIT
13.Grants by the
Central Government.- The Central Government may, after due
appropriation made by Parliament by law in this behalf, make to the
Board grants of such sums of money as that Government may think fit
for being utilized for the purposes of this Act.
14.Fund.- (1) There shall
be constituted a Fund to be called the Securities and Exchange Board
of India General Fund and there shall be credited
thereto-
(a) all grants, fees and charges received by the
Board under this Act; and
(b) all sums received by the Board
from such other sources as may be decided upon by the Central
Government.
(2) The Fund shall be applied for
meeting-
(a) the salaries, allowances and other remuneration
of the members, officers and other employees of the
Board;
(b) the expenses of the Board in the discharge of its
functions under section 11,
(c) the expenses on objects and
for purposes authorised by this Act.
15.Accounts and audit.- (1)
The Board shall maintain proper accounts and other relevant records
and prepare and annual statement of accounts in such form as may be
prescribed by the Central Government in consultation with the
Comptroller and Auditor-General of India.
(2) The accounts of
the Board shall be audited by the Comptroller and Auditor-General of
India at such intervals as may be specified by him and any
expenditure incurred in connection with such audit shall be payable
by the Board to the Comptroller and Auditor-General of
India.
(3) The Comptroller and Auditor-General of India and
any other person appointed by him in connection with the audit of
the accounts of the Board shall have the same rights and privileges
and authority in connection with such audit as the Comptroller and
Auditor-General generally has in connection with the audit of the
Government accounts and, in particular, shall have the right to
demand the production of books, accounts, connected vouchers and
other documents and papers and to inspect any of the offices of the
Board.
(4) The accounts of the Board as certified by the
Comptroller and Auditor-General of India or any other person
appointed by him in this behalf together with the audit report
thereon shall be forwarded annually to the Central Government and
that Government shall cause the same to be laid before each House of
Parliament.
CHAPTER
VII
MISCELLANEOUS
16.Power of Central Government to
issue directions.- (1) Without prejudice to the foregoing
provisions of this Act, the Board shall, in exercise of its powers
or the performance of its functions under this Act, be bound by such
directions on questions of policy as the Central Government may give
in writing to it from time to time:
Provided that the Board
shall, as far as practicable, be given an opportunity to express its
views before any direction is given under this
sub-section.
(2) The decision of the Central Government
whether a question is on of policy or not shall be final.
17.Power of Central Government
to supersede the Board.- (1) If at any time the Central
Government is of opinion-
(a) that on account of grave
emergency, the Board is unable to discharge the functions and duties
imposed on it by or under the provisions of this Act: or
(b)
that the Board has persistently made default in complying with any
direction issued by the Central Government under this Act or in the
discharge of the functions and duties imposed on it by or under the
provision of this Act and as a result of such default the financial
position of the Board or the administration of the Board has
deteriorated: or
(c) that circumstances exist which render it
necessary in the public interest so to do,
the Central
Government may, by notification, supersede the Board for such
period, not exceeding six months, as may be specified in the
notification.
(2) Upon the publication of a notification
under sub-section (1) superseding the Board,-
(a) all the
members shall, as from the date of suppression, vacate their offices
as such;
(b) all the powers, functions and duties which may,
by or under the provisions of this Act, be exercised or discharged
by or on behalf of the Board, shall until the Board is reconstituted
under sub-section (3), be exercised and discharged by such person or
persons as the Central Government may direct; and
(c) all
property owned or controlled by the Board shall, until the Board is
reconstituted under subsection (3), vest in the Central
Government.
(3) On the expiration of the period of
suppression specified in the notification issued under sub-section
(1), the Central Government may reconstitute the Board by a fresh
appointment and in such case any person or persons who vacated their
offices under clause (a) 0f sub-section (2), shall not be deemed
disqualified for appointment:
Provided that the Central
Government may, at any time, before the expiration of the period of
suppression, take action under this sub-section.
(4) The
Central Government shall cause a notification issued under
sub-section (10 and a full report of any action under this section
and the circumstances leading to such action to be laid before each
House of Parliament at the earliest.
18.Returns and reports.-
(1) The Board shall furnish to the Central Government at such time
and in such form and manner as may be prescribed or as the Central
Government may direct, such returns and statements and such
particulars in regard to any proposed or existing program for the
promotion and development the securities market, as the Central
Government may, from time to time, require.
(2) Without
prejudice to the provision of sub-section (1), the Board shall,
within sixty days after the end of each financial year, submit to
the Central Government a report in such form, as may be prescribed,
giving a true and full account of its activities, policy and
programmes during the previous financial year.
(3) A copy of
the report received under sub-section (2) shall be laid, as soon as
may be after it is received, before each House of
Parliament.
19.Delegation.- The Board
may, by general or special order in writing delegate to any member,
officer of the Board or any other person subject to such conditions,
if any, as may be specified in the order, such of its powers and
functions under this Act (except the powers under section 29) as it
may deem necessary.
20.Appeals.- (1) Any person
aggrieved by an order of the Board made under this Act, or the rules
or regulations made thereunder may prefer an appeal to the Central
Government within such time as may be prescribed.
(2) N o
appeal shall be admitted if it is preferred after the expire of the
period prescribed therefor:
Provided that an appeal may be
admitted after the expire of the period prescribed therefor if the
appellant satisfies the Central Government that he had sufficient
cause for not preferring the appeal within the prescribed
peruse.
(3) Every appeal made under this section shall be
made in such form and fees as may be prescribed.
(4) The
procedure for disposing of an appeal shall be such as may be
prescribed:
Provided that before disposing of an appeal, the
appellant shall be given a reasonable opportunity of being
heard.
21.Savings.- Nothing in
this Act shall exempt any person from any suit or other proceedings
which might, apart from this Act, be brought against him.(
Savings)
22.Members,
officers and employees of the Board to be public servants.- All
members, officers and other employees of the Board shall be deemed
when acting or purporting to act in pursuance of any of the
provisions of this Act, to be public servants within the meaning of
section 21 of the Indian Penal Code (45 of 1860).
23.Protection of action taken
in good faith.- No suit, prosecution or other legal proceedings
shall lie against the Central Government or any officer of the
Central Government or any member, officer or other employee of the
Board for anything which is in good faith done or intended to be
done under this Act or the rules or regulations made
thereunder.
24.Penalty.- Whoever
contrivances or attempts to contrivance or abets the contravention
of the provisions of this Act or any rules of regulations made
thereunder, shall be punishable with imprisonment for a term which
may extend to one year, or with fine, or with
both.(penalty)
25.Exemption from tax on wealth
and income.- Notwithstanding anything contained in the
Wealth-tax Act, 1957, (27 of 1957) the Income-tax Act, 1961 (43 of
1961) or any other enactment for the time being in force relating to
tax on wealth, income, profits or gains--
(a) the
Board;
(b) the existing Securities and Exchange Board from
the date of its constitution to the date of establishment of the
Board,
shall not be liable to pay wealth-tax or any other tax
in respect of their wealth, income profits or gains
derived.(Exception from tax on wealth and income)
26.Cognizance of Offences by
courts.- (1) No court shall take cognizance of any offence
punishable under this Act or any rules or regulations made
thereunder, save on a complaint made by the Board with the previous
sanction of the Central Government.(Cognizance of Offences by
courts)
(2) No court inferior to that of Metropolitan
Magistrate or a Judicial Magistrate of the first class shall try any
offence punishable under this Act.
27.Offences by companies.-
(1) Where an offence under this Act was committed was in charge of,
and was responsible to, the company for the conduct of the business
of the company, as well as the company, shall be deemed to be guilty
of the offence and shall be liable to be proceeded against and
punished accordingly:
Provided that nothing contained in this
sub-section shall render any such person liable to any punishment
provided in this Act, if he proves that the offence was committed
without his knowledge or that he had exercised all due diligence to
prevent the commission of such offence.
(2) Not withstanding
anything contained in sub-section (1), where an offence under this
Act has been committed by a company and it is proved that the
offence has been committed with the consent or connivance of , or is
attribute to any neglect on the part of any director , manager,
secretary or other officer shall also be deemed to be guilty of the
offence and shall be liable to be proceeded against and punished
accordingly.
Explanation.-- For the purposes of this
section,---
(a) "company" means any body corporate and includes a
firm or other association of individuals; and
(b) "director",
in relation to a firm, means a partner in the firm.
28.Power to exempt.-If the
Central Government is of the opinion that it is necessary or
expedient so to do in public interest.it may by order published in
the Official Gazette, exempt any person or class of persons buying
or selling securities or otherwise dealing with the securities
market from the operation of the provisions of sub-section (1) of
section 12.
29.Power
to make rules.- (1) The Central Government may be notification,
make rules for carrying out the purposes of this Act
In
particular and without prejudice to the generality of the foregoing
power such rules and may provide for all or any of the following
matters namely
(a) the term of office and other conditions of
service of the Chairman and the members under sub-section (1) of
section 5
(b) the additional functions that may be performed
by the Board under section 11
(c) the conditions subject to
which registration certificate is to be issued under sub-section (1)
of section 12
(d) the manner in which the account of the
Board shall be maintained under section
(e) the form and the
manner in which returns and report to be made to the Central
Government under section 18.
(f) any other manner which is to
be or may be prescribed or in respect of which provision is to be or
may be made by rules.
30.Power to make
regulations.- (1) The Board may with the previous approval of
the Central Government by notification make regulations consistent
with this Act and the rules made there under to carry out the
purposes of this Act.
(2) In particular and without prejudice
to the generality of the foregoing power, such regulations may
provide for all or any of the following matters namely
(a)
the times and places of meeting of the Board and the procedure to be
following at such meeting under sub-section (1) of section 7
including quorum necessary for the transaction of
business
(b) the term and other conditions of service of
officers and employees of the Board under sub-section (2) of section
9
(c) the amount of fee to be paid for registration
certificate and manner of suspension or cancellation of registration
certificate under sub-section (2) (3) of section 12
31.Rules and regulations to be
laid before Parliament.- Every rule and every regulation made
under this Act shall be laid as soon as may be after it is made,
before each House of Parliament while it is in session for a total
period of thirty days which may be comprised in one session or in
two or more successive sessions, and if before the expire of the
session immediately following the session or the successive sessions
aforesaid, both Houses agree in making any modification in the rule
or regulation shall thereafter have effect in only such modified
form or be of no effect as the case may be so however that any such
modification or annulment shall be without prejudice to the validity
of anything previously done under that rule or regulation.
32.Application of other laws
not barred.- The provisions of this Act shall be in addition to
and not in derogation of the provisions of any other law for the
time being in force
33.Amendment of certain
enactments.- The enactment's specified in Parts I and II of the
Schedule to this Act shall be Amended in the manner specified
therein and such Amendments shall take effect on the date of
establishment of the board.
34.Power to remove
difficulties.- (1) If any difficulty arises in giving effect to
the provisions of this Act, the Central Government may, by order
published in the Official Gazette make such provisions not
inconsistent with the provision of this Act as many appear to be
necessary for removing the difficulties.
Provided that no
order shall be made under this section after the expire of five
years from the commencement of this Act.
(2) Every order made
under this section shall be laid as soon as may be after it is made,
before each House of Parliament
35.Repeal and saving.- (1)
The Securities and Exchange Board of India Ordinance 1992 (Ord.5 of
1922) is hereby repealed.
(2) Notwithstanding such repeal
anything done or any action taken under the said Ordinance shall be
deemed to have done or taken under the corresponding provisions of
this Act.
THE
SCHEDULE
(See section 33)
AMENDMENT OF CERTAIN
ENACTMENTS
PART
I
AMENDMENT TO
THE CAPITAL ISSUES (CONTROL) ACT, 1947
(29 OF
1947)
In section 10 for to that Government substitute to that
Government or the Securities and Exchange Board of India
PART II
AMENDMENTS TO THE SECURITIES
CONTRACTS (REGULATION) ACT, 1956
(42 OF
1956)
1.Section 2 in clause (h) for sub-clause (ii)
substitute the following
(ii) Government securities
(iia)
such other instruments as may be declared by the Central Government
to be securities and
2.Section 6
(i) in sub-section
(1) for Central Government substitute Securities and Exchange Board
of India;
(ii) in sub-section (2) for by the Central
Government substitute by the Securities and Exchange Board of
India.
3.Section 9 for Central Government wherever it occurs
substitute Securities and Exchange Board of India
4 Section
10 for Central Government wherever it occurs substitute Securities
and Exchange Board of India
5.Section 17 for Central
Government wherever it occurs substitute Securities and Exchange
Board of India
6.Section 21 for Central Government wherever
it occurs substitute Securities and Exchange Board of
India
7.Section 22A in sub-section (3) for clause (b)
substitute the following
(b) that the transfer of the
securities is in contravention of any law or rules made thereunder
or any administrative instructions or conditions of listing
agreement laid down in pursuance of such laws and
rules."
8.In sub-section (2) of section 23 for Central
Government under section 21 or section 22 substitute Securities and
Exchange Board of India under section 21 or the Central Government
under section 22
9.After section 29 insert the following
:-
29A.Power to delegate.- The Central Government may by
order published in the Official Gazette direct that the powers
exercisable by it under any provision of this Act shall in relation
to such matters and subject to such conditions if any as may be
specified in order be excusable also by the Securities and Exchange
Board of India.