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THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

Title : THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

Year : 1992



(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 exchanges 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;

1*[(ba) Registering and regulating the working of the 2*[depositories, participants, custodians] of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification specify in this behalf;]

(c) Registering and regulating the working of 3*[venture capital funds and collective investment schemes], including mutual funds;

(d) Promoting and regulating self-regulatory organisations;

(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 the4*[stock exchanges, mutual funds, other persons associated with the securities market] intermediaries and self-regulatory organisations in the securities market;

8*[(ia) Calling for information and records from any person including any bank or any other authority or board or corporation established or constituted by or under any Central or State Act which, in the opinion of the Board, shall be relevant to any investigation or inquiry by the Board in respect of any transaction in securities;]

9*[(ib) Calling for information from, or furnishing information to, other authorities, whether in India or outside India, having functions similar to those of the Board, in the matters relating to the prevention or detection of violations in respect of securities laws, subject to the provisions of other laws for the time being in force in this regard:

Provided
that the Board, for the purpose of furnishing any information to any authority outside India, may enter into an arrangement or agreement or understanding with such authority with the prior approval of the Central Government;]

(j) Performing such functions and exercising such powers under the provisions of 6[***] 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;

1*[(la) Calling from or furnishing to any such agencies, as may be specified by the Board, such information as may be considered necessary by it for the efficient discharge of its functions;]

(m) Performing such other functions as may be prescribed.

5*[(2A) Without prejudice to the provisions contained in sub-section (2), the Hoard may take measures to undertake inspection of any book, or register, or other document or record of any listed public company or a public company (not being intermediaries referred to section 12) which intends to get its securities listed on any recognized stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market.)

1*[(3) Notwithstanding anything contained in any other law for the time being in force while exercising the powers under7[clause (i) or clause (ia) of sub-section (2) or sub-section (2A)], the Board shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit, in respect of the following matters, namely:-

(i) The discovery and production of books of account and other documents, at such place and such time as may be specified by the Board;

(ii) Summoning and enforcing the attendance of persons and examine them on oath;

(iii) Inspection of any books, registers and other documents of any person referred to in section 12, at any place.]

5*[(iv) Inspection of any book, or register, or other document or record of the company referred to in section (2A);

(v) Issuing commissions for the examination of witnesses or documents.]

5*[(4) Without prejudice to the provisions contained in sub-sections (1), (2), (2A) and (3) and section 11B, the Board may, by an order, for reasons to be recorded in writing, in the interests of investors or securities market, take any of the following measures, either pending investigation or inquiry or on completion of such investigation or inquiry, namely:-

(a) Suspend the trading of any security in a recognized stock exchange;

(b) Restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities;

(c) Suspend any office-bearer of any stock exchange or self-regulatory organisation from holding such position;

(d) Impound and retain the proceeds or securities in respect of any transaction which is under investigation;

(e) Attach after passing of an order on an application made for approval, by the Judicial Magistrate of first class having jurisdiction, for a period not exceeding one month, one or more bank account or accounts of any intermediary or any person associated with the securities market in any manner involved in violation of any of the provisions of this Act, or the rules or the regulations made there under:

Provided that only the bank account or accounts or any transaction entered therein, so far as it relates to the proceeds actually involved in violation of any of the provisions of this Act, or the rules or the regulations made there under shall be allowed to be attached.

(f) Direct any intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of any transaction which is under investigation:

Provided
that the Board may, without prejudice to the provisions contained in sub-section (2) or sub-section (2A), take any of the measures specified in clause (d) or clause (e) or clause (f), in respect of any listed public company or a public company (not being intermediaries referred to in section 12) which intends to get its securities listed on any recognised stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market:

Provided further
that the Board shall, either before or after passing such orders, give an opportunity of hearing to such intermediaries or persons concerned.]

10*[(5) The amount disgorged, pursuant to a direction issued, under section 11B of this Act or section 12A of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or section 19 of the Depositories Act, 1996 (22 of 1996), as the case may be, shall be credited to the Investor Protection and Education Fund established by the Board and such amount shall be utilised by the Board in accordance with the regulations made under this Act.]

11A - 11*Board to regulate or prohibit issue of prospectus, offer document or advertisement soliciting money for issue of securities

(1) Without prejudice to the provisions of the Companies Act, 1956 (1 of 1956), the Board may, for the protection of investors,-

(a) Specify, by regulations-

(i) The matters relating to issue of capital, transfer of securities and other matters incidental thereto; and

(ii) The manner in which such matters shall be disclosed by the companies;

(b) By general or special orders-

(i) Prohibit any company from issuing of prospectus, any offer document, or advertisement soliciting money from the public for the issue of securities;

(ii) Specify the conditions subject to which the prospectus, such offer document or advertisement, if not prohibited, may be issued.

(2) Without prejudice to the provisions of section 21 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Board may specify the requirements for listing and transfer of securities and other matters incidental thereto.]

11AA -12*Collective investment scheme

(1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) 13*[or sub-section (2A)] shall be a collective investment scheme.

13*[Provided that any pooling of funds under any scheme or arrangement, which is not registered with the Board or is not covered under sub-section (3), involving a corpus amount of one hundred crore rupees or more shall be deemed to be a collective investment scheme.]

(2) Any scheme or arrangement made or offered by any 14*[person] under which,-

(i) The contributions, or payment made by the investors, by whatever name called, are pooled and utilized for the purposes of the scheme or arrangement;

(ii) The contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable, from such scheme or arrangement;

(iii) The property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors;

(iv) The investors do not have day-to-day control over the management and operation of the scheme or arrangement.

13*[(2A) Any scheme or arrangement made or offered by any person satisfying the conditions as may be specified in accordance with the regulations made under this Act.]

(3) Notwithstanding anything contained in sub-section (2) 2[or sub-section (2A)], any scheme or arrangement-

(i) Made or offered by a co-operative society registered under the Cooperative Societies Act, 1912 (2 of 1912) or a society being a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any State;

(ii) Under which deposits are accepted by non-banking financial companies as defined in clause (f) of section 45-1 of the Reserve Bank of India Act, 1934 (2 of 1934);

(iii) Being a contract of insurance to which the Insurance Act, 1938 (4 of 1938), applies;

(iv) Providing for any scheme, pension scheme or the insurance scheme framed under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952);

(v) Under which deposits are accepted under section 58A of the Companies Act, 1956 (1 of 1956);

(vi) Under which deposits are accepted by a company declared as a Nidhi or a Mutual Benefit Society under section 620A of the Companies Act, 1956 (1 of 1956);

(vii) Falling within the meaning of chit business as defined in clause (e) of section 2 of the Chit Funds Act, 1982 (40 of 1982);

(viii) Under which contributions made are in the nature of subscription to a mutual fund,

13*[(ix) such other scheme or arrangement which the Central Government may, in consultation with the Board, notify,
shall not be collective investment scheme.]

11B - 15*Power to issue directions

Save as otherwise provided in section 11, if after making or causing to be made an enquiry, the Board is satisfied that it is necessary-

(i) In the interest of investors, or orderly development of securities market; or

(ii) To prevent the affairs of any intermediary or other persons referred to in section 12 being conducted in a manner detrimental to the interests of investors or securities market; or

(iii) To secure the proper management of any such intermediary or person,it may issue such directions,-

(a) To any person or class of persons referred to in section 12, or associated with the securities market; or

(b) To any company in respect of matters specified in section 11A,
as may be appropriate in the interests of investors in securities and the securities market.]

16*[Explanation.-For the removal of doubts, it is hereby declared that the power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention.]

11C -17* Investigation

(1) Where the Board has reasonable ground to believe that-

(a) The transactions in securities are being dealt with in a manner detrimental to the investors or the securities market; or

(b) Any intermediary or any person associated with the securities market has violated any of the provisions of this Act or the rules or the regulations made or directions issued by the Board there under,
it may, at any time by order in writing, direct any person (hereafter in this section referred to as the Investigating Authority) specified in the order to investigate the affairs of such intermediary or persons associated with the securities market and to report thereon to the Board.

(2) Without prejudice to the provisions of sections 235 to 241 of the Companies Act, 1956 (1 of 1956), it shall be the duty of every manager, managing director, officer and other employee of the company and every intermediary referred to in section 12 or every person associated with the securities market to preserve and to produce to the Investigating Authority or any person authorized by him in this behalf, all the books, registers, other documents and record of, or relating to, the company or, as the case may be, of or relating to, the intermediary or such person, which are in their custody or power.

(3) The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to, or produce such books, or registers, or other documents, or record before him or any person authorised by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books, or registers, or other documents, or record is relevant or necessary for the purposes of its investigation.

(4) The Investigating Authority may keep in its custody any books, registers, other documents and record produced under sub-section (2) or subsection (3) for six months and thereafter shall return the same to any intermediary or any person associated with securities market by whom or on whose behalf the books, registers, other documents and record are produced:

Provided that the Investigating Authority may call for any book, register, other document and record if they are needed again:

Provided further that if the person on whose behalf the books, registers, other documents and records are produced requires certified copies of the books, registers, other documents and record produced before the Investigating Authority, it shall give certified copies of such books, registers, other documents and record to such person or on whose behalf the books, registers, other documents and records were produced.

(5) Any person, directed to make an investigation under sub-section (1), may examine on oath, any manager, managing director, officer and other employee of any intermediary or any person associated with securities market in any manner, in relation to the affairs of his business and may administer an oath accordingly and for that purpose may require any of those persons to appear before him personally.

(6) If any person fails without reasonable cause or refuses-

(a) To produce to the Investigating Authority or any person authorised by it in this behalf any book, register, other document and record which is in his duty under sub-section (2) or subsection (3) to produce; or

(b) To furnish any information which is his duty under sub-section (3) to furnish; or

(c) To appear before the Investigating Authority personally when required to do so under sub-section (5) or to answer any question which is put to him by the Investigating Authority in pursuance of that sub-section; or

(d) To sign the notes of any examination referred to in sub-section (7),he shall be punishable with imprisonment for a term which may extend to one year, or with fine, which may extend to one crore rupees, or with both, and also with a further fine which may extend to five lakh rupees for every day after the first during which the failure or refusal continues.

(7) Notes of any examination under sub-section (5) shall be taken down in writing and shall be read over to, or by, and signed by, the person examined, and may thereafter be used in evidence against him.

(8) Where in the course of investigation, the Investigating Authority has reasonable ground to believe that the books, registers, other documents and record of, or relating to, any intermediary or any person associated with securities market in any manner, may be destroyed, mutilated, altered, falsified or secreted, the Investigating Authority may make an application to 18*[the Magistrate or Judge of such designated court in Mumbai, as may be notified by the Central Government] for an order for the seizure of such books, registers, other documents and record.

19*[(8A) The authorised officer may requisition the services of any police officer or any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (8) and it shall be the duty of every such officer to comply with such requisition.]

(9) After considering the application and hearing the Investigating Authority, if necessary, 20*[the Magistrate or Judge of the Designated Court], by order, authorise the Investigating Authority-

(a) To enter, with such assistance, as may be required, the place or places where such books, registers, other documents and record are kept;

(b) To search that place or those places in the manner specified in the order; and

(c) To seize books, registers, other documents and record, it considers necessary for the purposes of the investigation:

Provided that 20*[the Magistrate or Judge of the Designated Court] shall not authorise seizure of books, registers, other documents and record, of any listed public company or a public company (not being the intermediaries specified under section 12) which intends to get its securities listed on any recognised stock exchange unless such company indulges in insider trading or market manipulation.

(10) The Investigating Authority shall keep in its custody the books, registers, other documents and record seized under this section for such period not later than the conclusion of the investigation as it considers necessary and thereafter shall return the same to the company or the other body corporate, or, as the case may be, to the managing director or the manager or any other person, from whose custody or power they were seized and inform 20*[the Magistrate or Judge of the Designated Court] of such return:

Provided that the Investigating Authority may, before returning such books, registers, other documents and record as aforesaid, place identification marks on them or any part thereof.

(11) Save as otherwise provided in this section, every search or seizure made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to searches or seizures made under that Code.]

11D - 21*Cease and desist proceedings

If the Board finds, after causing an inquiry to be made, that any person has violated, or is likely to violate, any provisions of this Act, or any rules or regulations made thereunder, it may pass an order requiring such person to cease and desist from committing or causing such violation:

Provided that the Board shall not pass such order in respect of any listed public company or a public company (other than the intermediaries specified under section 12) which intends to get its securities listed on any recognised stock exchange unless the Board has reasonable grounds to believe that such company has indulged in insider trading or market manipulation.]

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1. Inserted by Act 9 of 1995, section 5 (w.r.e.f. 25-1-1995).

2. Substituted by Act 22 of 1996, section 30 and Schedule, for "depositories, custodians" (w.r.e.f. 20-9-1995).

3.Substituted by Act 9 of 1995, section 5, for "collective investment schemes" (w.r.e.f. 25-1-1995).

4. Substituted by Act 9 of 1995, section 5, for "stock exchanges and" (w.r.e.f. 25-1-1995).

5. Inserted by Act 59 of 2002, section 4 (w.r.e.f. 29-10-2002).

6. The words "The Capital Issues (Control) Act, 1947 (29 of 1947)" omitted by Act 9 of 1995, section 5 (w.r.e.f. 25-1-1995).

7. Substituted by Act 59 of 2002, section 4, for "clause (i) of sub-section (2)" (w.r.e.f. 29-10-2002).

8. Substituted by the Securities Laws (Amendment) Act, 2014 for the following:-

"5[(ia) calling for information and record from any bank or any other authority or board or corporation established or constituted by or under any Central, State or Provincial Act in respect of any transaction in securities which is under investigation or inquiry by the Board;]"

9. Inserted by the Securities Laws (Amendment) Act, 2014 w.e.f 06.03.1998.

10. Inserted by the Securities Laws (Amendment) Act, 2014.

11. Section "11 A. Matters to be disclosed by the companies.-Without prejudice to the provisions of the Companies Act, 1956 (1 of 1956), the Board may, for the protection of investors, specify, by regulations,-

(a) The matters relating to issue of capital, transfer of securities and other matters incidental thereto; and

(b) The manner in which such matters, shall be disclosed by the companies."

Inserted by Act 9 of 1995, section 6 (w.r.e.f. 25-1-1995) and substituted by Act 59 of 2002, section 5 (w.r.e.f. 29-10-2002).

12. Inserted by Act 31 of 1999, section 11 (w.e.f. 22-2-2000).

13. Inserted by the Securities Laws (Amendment) Act, 2014.

14. Substituted by the Securities Laws (Amendment) Act, 2014, for the following:-"company"

15. Inserted by Act 9 of 1995, section 6 (w.r.e.f. 25-1-1995).

16. Inserted by the Securities Laws (Amendment) Act, 2014.

17. Inserted by Act 59 of 2002, section 6(w.r.e.f. 29-10-2002).

18. Substituted by the Securities Laws (Amendment) Act, 2014, for the following:-

"the Judicial Magistrate of the first class having jurisdiction"

19. Inserted by the Securities Laws (Amendment) Act, 2014.

20. Substituted by the Securities Laws (Amendment) Act, 2014, for the following:-"the Magistrate may"

21.Inserted by Act 59 of 2002, section 6(w.r.e.f. 29-10-2002).

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Last updated on July, 2016

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