Securities Law & Capital Markets (SLCM)

Securities Law & Capital Markets

Company Secretary (CS) Executive Programme - Module 2, Paper 6

Securities Law & Capital Markets:

SECURITIES LAW - the body of laws governing the issuance and selling of securities

The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India. It was established in the year 1988 and given statutory powers on 30 January 1992 through the SEBI Act, 1992. The Preamble of the SEBI describes the basic functions of the Securities and Exchange Board of India as " protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected there with or incidental there to". SEBI has to be responsive to the needs of three groups, which constitute the market- the issuers of securities, the investors and the market intermediaries.

CAPITAL MARKETS - It can be either a primary market or a secondary market.

In primary markets, new stock or bond issues are sold to investors, often via a mechanism known as underwriting. The main entities seeking to raise long-term funds on the primary capital markets are governments (which may be municipal, local or national) and business enterprises (companies). Governments issue only bonds, whereas companies often issue both equity and bonds. The main entities purchasing the bonds or stock include pension funds, hedge funds, sovereign wealth funds, and less commonly wealthy individuals and investment banks trading on their own behalf. In the secondary markets, existing securities are sold and bought among investors or traders, usually on an exchange, over-the-counter, or elsewhere. The existence of secondary markets increases the willingness of investors in primary markets, as they know they are likely to be able to swiftly cash out their investments if the need arises. A second important division falls between the stock markets (for equity securities, also known as shares, where investors acquire ownership of companies) and the bond markets (where investors become creditors).

As per new syllabus 2018, it is covered under Company Secretary (CS) Executive Programme in Module 2, Paper 6- SECURITIES LAW & CAPITAL MARKETS.

  1. Level of Knowledge: Expert Knowledge
  2. Objective of ICSI:
  • Part I: To provide expert knowledge in the legislations, rules and regulations governing the entities listed on the stock exchanges.
  • Part II: To provide the basic understanding of the working of Capital markets in India.
  1. Mode of examination: Written based. (Case Laws, Case Studies & Practical Aspects)
  2. 100 Marks Paper:
Part I: Securities Law Part B: Capital Market & Intermediaries
70 marks 30 marks
Securities Contracts (Regulations) Act 1956:

Objectives of the SCR Act, Rules and Regulations made there under; Important Definitions; Recognized Stock Exchange, Clearing Corporation; Public issue and listing of securities; Rules relating to Public Issue and Listing of Securities under Securities Contracts (Regulation) Rules, 1957.

Structure of Capital Market

I. Primary Market

a. Capital Market Investment Institutions-Domestic Financial Institutions(DFI), Qualified Institutional Buyers(QIB), Foreign Portfolio Investors (FPI), Private Equity, Angel Funds, HNIs, Venture Capital, Pension Funds, Alternative Investment Funds.

b. Capital Market Instruments-Equities, Preference Shares, Shares with Differential Voting Rights, Corporate Debt, Non-Convertible Debentures(NCD), Partly, Fully and Optionally Convertible Debentures, Bonds, Foreign Currency Convertible Bonds(FCCB), Foreign Currency Exchangeable Bonds (FCEB) Indian Depository Receipts (IDR),  Derivatives, Warrants;

c. Aspects of Primary Market- book building, ASBA, Green Shoe Option.

Securities and Exchange Board of India Act, 1992:

Objective; Powers and functions of SEBI; Securities Appellate Tribunal; Penalties and appeals.

II. Secondary Market

Development of Stock market in India; Stock market & its operations, Trading Mechanism, Block and Bulk deals, Grouping, Basis of Sensex, Nifty; Suspension and Penalties; Surveillance Mechanism; Risk management in Secondary market, Impact of various Policies on Stock Markets such as Credit Policy of RBI, Fed Policy, Inflation index, CPI, WPI, etc.

Depositories Act, 1996:

Depository System in India; Role & Functions of Depositories; Depository Participants; Admission of Securities; Dematerialization & Re-materialisation; Depository Process; Inspection and Penalties; Internal Audit and Concurrent Audit of Depository Participants.

Securities Market Intermediaries:

Primary Market and Secondary Market Intermediaries: Role and Functions, Merchant Bankers, Stock Brokers, Syndicate Members, Registrars and Transfer Agents, Underwriters, Bankers to an Issue, Portfolio Managers, Debenture Trustees, Investment Advisers, Research Analysts, Market Makers, Credit Rating Agencies; Internal Audit of Intermediaries by Company Secretary in Practice.

An Overview of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.  
An Overview of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.  
An Overview of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.  
SEBI (Buyback of Securities) Regulations, 1998:

Conditions of buy-back; Buy back Methods: Tender Offer, Open Market (Book building and Stock Exchange); General obligations; Penalties.

SEBI (Delisting of Equity Shares) Regulations, 2009:

Delisting of Equity Shares; Voluntary Delisting; Exit Opportunity; Compulsory Delisting.

An Overview of SEBI (Share Based Employee Benefits) Regulations, 2014.
An Overview of SEBI (Issue of Sweat Equity) Regulations, 2002.
SEBI (Prohibition of Insider Trading) Regulations, 2015:

Unpublished price sensitive information (UPSI); Disclosures; Codes of fair disclosure and conduct; Penalties and Appeals.

Mutual Funds:

Types of Mutual Funds and Schemes; Key players in Mutual Funds: Sponsor, Asset Management Company, Trustee, Unit holder, Evaluating performance of Mutual funds- Net Asset Value, Expense Ratio, Holding Period Return.

Collective Investment Schemes:

Regulatory Framework; Restrictions on Business Activities; Submission of Information and Documents; Trustees and their Obligations.

SEBI (Ombudsman) Regulations, 2003:

Procedure for Redressal of Grievances; Implementation of the Award; Display of the particulars of the Ombudsman, SCORES, SEBI (Informal Guidance) Scheme, 2003.

Link for CS Executive New syllabus2018 (website)