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SECURITIES MARKET REFORMS & REGULATORY MEASURES

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The Govt. of India and SEBI has taken a number of measures in order to improve the working of securities market. In this regard, the major reforms undertaken in capital market of India include: 

Control over issue of Capital: Earlier, the capital market was regulated by the Capital Issues (Control) Act, 1947. In 1992, the SEBI Act, 1992 was enacted by the Parliament of India to protect the interests of investors and also to regulate the capital market. The SEBI Act, 1992 replaced the earlier law i. e. the Capital Issues (Control) Act, 1947. 

Establishment of regulator: A major initiative of regulation was the establishment of a statutory autonomous agency i. e. SEBI in year 1992. 

Screen Based Regulator: To make the capital market transparent, a major initiative was a nation – wide on – line fully – automated screen based trading system (SBTS) where a member can punch into the computer quantities of securities and the prices at which he likes to transact and the transaction is executed as soon as it finds a matching sale or buy order from 0a counter party. 

Depositories Act, 1996: The earlier settlement system gave rise to settlement risk. This was due to the time taken for settlement and due to the physical movement of paper. Further, the transfer of shares in favour of the purchaser by the company also consumed considerable amount of time. To obviate these problems, the Depositories Act, 1996 was passed to provide for the establishment of depositories in securities.

Corporate Governance: The SEBI amended Clause 49 of the Listing Agreement and inserted the new provisions relating to the Corporate Governance. The major changes in the new Clause 49 include amendments/additions to provisions relating to definition of independent directors, strengthening the responsibilities of audit committees, improving quality of financial disclosures etc. Certain non – mandatory clauses are also included like whistle blower policy. 

Green Shoe Option: As a stabilization tool for post listing price of newly issued shares, SEBI has introduced the green shoe option facilities in IPOs. 

Grading for Initial Public Offerings: Grading of all IPOs was made mandatory. The grading would be done by credit rating agencies, registered with SEBI. It would be mandatory to obtain grading from at least one credit rating agency. The grading would be disclosed in the prospectus, abridged prospectus and in every advertisement for IPOs.

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