sapm unit 2 part 1 ppt (1)

8/13/2019 Sapm Unit 2 Part 1 Ppt (1)

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Regulations of Primary Market

1. Entry Norms 2. Promoters Contribution

3. Disclosure 4. Book Building 5. Allocation of Share 6. Market Intermediaries


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1. Entry Norms

Dividend Payments for a minimum period of 3years preceding the issue.A company whose shares are already listed would

fulfill the entry level requirements only if the postissue networth becomes more than five times thepre issue networth.For a corporate body making a public issue tohave atleast five public shareholders for everyone lac of the net capital offer made to thepublic.


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2. Promotors contribution

PC - > 20% of the issued capital Issue Size exceeds 100 C, the Pro. not less

than 50% of their contribution before openingof the issue and bring in the balance beforethe calls are made on the shareholders.


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2. Promoters' contribution

Locking Period not more than 20% of theentire contribution Locked in for 5 yrs.

Not underwritten public issue within 60 daysof the closure of the issue.


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3. Disclosure Prospectus: A formal legal document, which is

required by and filed with the Securities andExchange Commission, that provides detailsabout an investment offering for sale to thepublic. A prospectus should contain the facts thatan investor needs to make an informedinvestment decision.

To enhance transparency. Details: present position of the company, the

future prospect and the risk factors


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4. Book Building Book Building is essentially a process used by

companies raising capital through Public Offerings-both Initial Public Offers (IPOs) or Follow-on PublicOffers ( FPOs) to aid price and demand discovery. It is

a mechanism where, during the period for which thebook for the offer is open, the bids are collected frominvestors at various prices, which are within the priceband specified by the issuer. The process is directedtowards both the institutional as well as the retail

investors. The issue price is determined after the bidclosure based on the demand generated in theprocess.


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75 percent Book Building Process:

100 percent Book Building Process:


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100% Book Building Process

Step: 1 Nominate Book runner Lead manager(BRLM)

Step: 2 Form Syndicate of Brokers, Arrangers,Underwriters, Financial Institutions, etc.

Step: 3 Submit Draft Offer Document to SEBIwithout mentioning Coupon Rate or Price

Notes: within 21 days


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Step: 4 Circulate offer Document among theSyndicate Members

Step: 5 Ask for Bids on Price and Quality ofSecurities

Step: 6 Aggregate and forward all offers toBook Runner

Step: 7 Run the Book to maintain a record ofSubscribers and their Orders


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Step: 8 Consult with Issuer and Determine theissue Price as Weighted Average of the OffersReceived

Step: 9 Firm up Underwriting Commitments Step: 10 Allot Securities Among Syndicate

Members

Step: 11 Securities Issued and Listed Step: 12 Trading Commences on Exchanges


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5. Allocation of Shares

A reservation of minimum 50% of net offers tothe small investors is being made.


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6. Intermediaries

Licensing of merchant bankers orauthorization by SEBI


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Stock Exchange

Anybody or individuals whether incorporatedor not, constituted for the process ofAssisting, Regulating or Controlling thebusiness of buying, selling in securities


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Features Market for securities Deals in second hand securities Regulates trade in securities Allows dealings only in listed securities Transactions effected only through members Association of persons - REGISTERED Recognition from Central Government Working as per rules Specific location : Stock exchange is a particular market

place where authorised brokers come together daily(i.e. on working days) on the floor of market calledtrading circles and conduct trading activities.

Financial Barometers


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FUNCTIONS OF SE

Providing Liquidity and Marketability toExisting Securities

Pricing of Securities Safety of Transaction Contributes to Economic Growth


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Facilitates evaluation of securities Encourages capital formation Provides safety and security in dealings Regulates company management Facilitates public borrowing Provides clearing house facility Facilitates healthy speculation Serves as Economic Barometer


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DISADVANTAGES Rampant Speculation Insider Trading Oligopolistic

Limited Forward Trading: Hand Delivery Settlement

Under this method, the delivery of securities andpayment are affected within the time stipulated

in the agreement or within 14 days from the dateof contract whichever is earlier. Most of thetransactions are conducted on the basis of handdelivery settlements.


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Spot trading

Trading by delivery of shares and payment for thesame on the date of purchase or on the next day.

Limited Forward Trading:

Carry Forward or 'Badla' refers to the trading inwhich the settlement of a transaction is

postponed to the next settlement period onpayment of some charges by way of interestknown as Badla Charges.


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Outdated Share Trading System Lack of a Single market


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Basis of Difference Primary market Secondary market

Issues Market for new securities. Market for existing

securities.Location No fixed geographical

locationLocated at a fixed place

Transfer of SecuritiesNature

Results in raising freshresources for the corporate

sector

Facilitates transferof securities from one

corporate investor toanother

Entry All companies participateinto primary market

Securities of only listedcompanies can be tradedat Stock exchanges

Administration No tangible form Tangible form andadministrative set up

Regulation Controlled by SEBI, Stockexchanges, Companies Act

Sub to control both fromwithin and outside


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Basis of Difference Primary market Secondary market

Aim Long term instrument Liquidity and marketability

Price movement SPM in SM influencesPricing of NI

Macro and micro factors

Depth Number and vol. of issue Activities of the primarymarket

Art of good investment Art comes to gallerydirectly from the artists

Art put up for sale


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Regulation of Secondary market

SE - 1956 Board of Governors Now, Indian SE Three Tier Regulation

First Level Authority

Central Govt. Second Level Authority SCRA and SEBI Third Level Authority Self Regulation

governing board


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Regulatory Structure

1. Stock Exchange Division: HQ Delhi Branch Office - Mumbai and Kolkata Functions: Providing linkage b/w govt. and SE Monitor Issuing licenses to brokers and dealers in

Securities


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2. SCRA 1952 - draft bill on stock exchange regulation

and A D Gorwala 1954 Securities Contracts (Regulation) Bill - Securities Contracts (Regulation) Act passed

SCRA + SCRR of 1957 and 1996


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3. SEBI Apex body

Dr. S. A. Dave Guidelines:


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4. Departments of Stock Exchange Listing Dept

Operational Dept Computer and EDP dept Inspection and Audit dept

Monitoring Dept Investor Service Dept


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SEBI

It was formed officially by the Government ofIndia in 1992 with SEBI Act 1992 being passedby the Indian Parliament .
http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Parliament_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_India


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SEBI

Initially SEBI was a non statutory body withoutany statutory power.

In 1995, the SEBI was given additional

statutory power by the Government of Indiathrough an amendment to the Securities andExchange Board of India Act 1992.

In April, 1998 the SEBI was constituted as theregulator of capital markets in India under aresolution of the Government of India.


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Objectives

To protect the interest of investors insecurities

To promote the development of the securitiesmarket

To regulate securities market and for mattersconnected therewith or incidental thereto


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Functions

Registering and monitoring of Intermediaries like Brokers who may participate in the securities marketRegulating the working of bankers to an issueControlling and regulating the Securities Market

Exercising the powers under SCRARegistering and monitoring the work of depository participants, custodiansof securities, FII's etcProhibiting unfair trade practices and fraudulent practices in the marketsPromoting Investor education

Training of IntermediariesProhibiting Insider tradingRegulating substantial acquisitions and take overs of companies.


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Management

The SEBI is managed by six members, i.e. bythe chairman who is nominated by centralgovernment & two members, i.e. officers ofcentral ministry, one member from the RBI &the remaining two are nominated by thecentral government.


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HQ and Regional Offices

The office of SEBI is situated at Mumbai withits regional offices at Kolkata, Delhi & Chennai.


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Responsibility

SEBI has to be responsive to the needs of threegroups, which constitute the market:

the issuers of securities the investors the market intermediaries.


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Powers

Power to conduct research and otherfunctions

Power to call for periodical returns fromrecognized stock exchanges

Power to levy fees Power to call for any information or

explanation from recognized stock exchangesof its members


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Powers

Power to regulate substantial acquisition ofshares and take over of companies

Power to promote investors education andtrading of intermediaries in capital market

Power to prohibit insider trading Power to make laws of recognized exchanges Power to compel listing of securities by public

companies


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Powers

Power to grant registration to marketintermediaries

Power to control and regulate stock exchanges


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Departments of SEBI

MARKET INTERMEDIARIES REGULATION ANDSUPERVISION DEPARTMENT (MIRSD)

Registration, supervision, compliancemonitoring and inspections of all marketintermediaries in respect of all segments ofthe markets .


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MARKET REGULATION DEPARTMENT (MRD) Supervising the functioning and operations

(except relating to derivatives) of securitiesexchanges, their subsidiaries, and marketinstitutions


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DERIVATIVES AND NEW PRODUCTSDEPARTMENT (DNPD)

For supervising the functioning andoperations of derivatives exchanges andrelated market organizations.


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CORPORATION FINANCE DEPARTMENT (CFD) (i) Issuance and listing of securities, including

initial and continuous listing requirements (ii) corporate governance and

accounting/auditing standards (iii) corporate restructuring through Takeovers

/ buy backs (iv) Delisting etc.


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INVESTMENT MANAGEMENT DEPARTMENT (IMD) INTEGRATED SURVEILLANCE DEPARTMENT (ISD) INVESTIGATIONS DEPARTMENT (IVD)

ENFORCEMENT OF DEPARTMENT (EFD) LEGAL AFFAIRS DEPARTMENT (LAD) ENQUIRIES AND ADJUDICATION DEPARTMENT (EAD) OFFICE OF INVESTOR ASSISTANCE AND EDUCATION

(OIAE) GENERAL SERVICES DEPARTMENT (GSD)


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Stock Exchanges in India

Two most important exchange houses of theIndian Stock market.

MJ Pherwani Committee three tier stockmarket system

ATFs


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Bombay Stock Exchange

sapm unit 2 part 1 ppt (1)

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