SEBI GRADE A OFFICER

CAPITAL MARKETS & SECURITIES LAWS

(Add-on Notes)

By CA ANKIT AGARWAL

Particulars Page
SEBI Committees (Past 1 Year) 1
Additional Points to Remember 3
SEBI Circulars (Past 4 Months) 11
Glossary 15

Note: These notes are complementary to the book. We have tried to incorporate
additional points that we came across. Hope these notes help you. We will share
more compilations on our website: bulkbooks.fwscart.com. Stay tuned.

All the best!

 SEBI Grade A Officer 1
Capital Markets and Securities Laws

SEBI COMMITTEES
Committee Chairman Purpose
Alternative Shri. N.R. 1. To advise SEBI on issues related to the further
Investment Narayana development of the alternative investment and
Policy Advisory Murthy, Founder, startup ecosystem in India.
Committee Infosys Limited 2. To advise SEBI on any hurdles that might hinder
the development of the alternative investment
industry under its purview.
3. To advise SEBI on any issues which need to be
taken up with other regulators for
development of the alternative investment
industry.
4. Any other item relevant to alternative
investment industry and development of the
startup ecosystem in India.

Corporate Bonds Shri. Harun R. 1. To advise SEBI on issues related to the

and Khan, Former development of the Corporate Bond Market and
Securitization Deputy the market for securitized instruments in India.
Advisory Governor, 2. To advise SEBI on implementing the
Committee Reserve Bank of recommendations of the High Level Committee
India on Corporate Bonds and Securitization.
3. To advise SEBI on removal of regulatory hurdles
under its purview and advise on issues which
need to be taken up with other regulators.
4. To advise SEBI on issues for addressing the
operational and systemic risks, if any, in the
market for corporate bonds and securitized
instruments.
5. Any other item relevant to Corporate Bonds &
Securitization Markets.

Committee on Dr. T. K. 1. Identification of opportunities for improvement

Fair Market Viswanathan, Ex- in SEBI (Prohibition of Insider Trading)
Conduct Secretary Regulations, 2015 and SEBI ( Prohibition of
General, Lok Fraudulent and Unfair Trade Practices relating
Sabha & Ex-Law to Securities Market) Regulations, 2003 more
Secretary particularly with respect to Trading plans,
handling of UPSI during takeovers and align
Insider Trading Regulations to Companies Act
provisions.
2. The committee will suggest short term and
medium term measures for improved
surveillance of the markets as well as issues of
High Frequency Trades, harnessing of
technology and analytics in surveillance.
 SEBI Grade A Officer 2
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Committee Chairman Purpose

Primary Market Shri. T.V. 1. To advise SEBI on issues related to regulation
Advisory Mohandas Pai, and development of primary market in India.
Committee Chairman, 2. To advise SEBI on matters required to be taken
Manipal Global up for changes in legal framework to introduce
Education simplification and transparency in systems and
Services Pvt. Ltd. procedures in the primary market.
3. To advise SEBI on matters relating to regulation
of intermediaries for ensuring investor
protection in the primary market.

Secondary Shri. Jayanth R. 1. To review developments in Secondary market;

Market Advisory Varma, 2. To recommend measures for changes and
Committee Professor, IIM improvements in market structure in view of
Ahmedabad the impending changes;
3. To recommend measures for improving market
safety, efficiency, transparency and integrity;
4. To suggest measures for reducing transaction
costs;
5. To recommend changes if required in the risk
management / margin system;
6. To recommend changes if required in the
regulatory framework in secondary market;
7. To take note of any new development which
may have taken place in the secondary market
between two consecutive meetings of the
Committee and suggest measures;
8. To review the investor protection measures in
the stock exchanges and suggest
improvements;
9. Any other matter that Committee considers
relevant or incidental thereto.

Advisory Ms. Arundhati 1. To advise SEBI on matters relating to regulation

Committee on Bhattacharya, of mutual funds for ensuring investor
Mutual Funds Former Protection.
Chairman, SBI 2. To advise SEBI on issues related to
development of mutual fund industry.
3. To advise SEBI on disclosure requirements.
4. To advise SEBI on measures required to be
taken for change in the legal framework to
introduce simplification and transparency in
the mutual fund regulations.
 SEBI Grade A Officer 3
Capital Markets and Securities Laws

ADDITIONAL POINTS TO REMEMBER:

Broker and Sub-broker in the Secondary Market: A broker is a member of a recognized

stock exchange, who is permitted to do trades on the screen-based trading system of
different stock exchanges. He is enrolled as a member with the concerned exchange and is
registered with SEBI. A sub broker is a person who is registered with SEBI as such and is
affiliated to a member of a recognized stock exchange.
A broker's registration number begins with the letters "INB" and that of a sub broker with the
letters “INS". For the brokers of derivatives segment, the registration number begins with
the letters “INF”. There is no sub-broker in the derivatives segment.

Member–Client Agreement Form: This form is an agreement entered between client and
broker in the presence of witness where the client agrees to trade/invest in the securities
listed on the concerned Exchange through the broker after being satisfied of broker’s
capabilities to deal in securities. The member, on the other hand agrees to be satisfied by
the genuineness and financial soundness of the client and making client aware of his
(broker’s) liability for the business to be conducted.

Unique Client Code: In order to facilitate maintaining database of their clients and to
strengthen the know your client (KYC) norms; all brokers have been mandated to use unique
client code linked to the PAN details of the respective client which will act as an exclusive
identification for the client.

BSE CARBONEX: In 2012, BSE launched, country’s first carbon based thematic index, BSE
Carbonex. It has 99 constituents and the major constituents by index weight are HDFC Bank,
Reliance Industries, Infosys and ITC (as on October 2018).
Why Carbonex?
• It will provide a benchmark and increase awareness about the dangers posed by climate
change.
• It will enable investors to gauge the performance of the constituent companies of BSE-
100 index regarding their commitment to greenhouse gases emission reduction.
• The index will encourage people to invest in companies performing well on the index thus
promoting low carbon growth.
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BSE GREENEX: In 2012, BSE launched the Green Index called Greenex. This is India's 1st
carbon-efficient live index and 2nd thematic index launched by BSE. The index has been
developed by the BSE in collaboration with IIM Ahmedabad. The Greenex is designed to
measure the performance of the top 25 “green” companies in terms of greenhouse gas (GHG)
emissions, market cap and liquidity. The major constituents by index weight are Tata
Consultancy Services, ITC, ICICI Bank and Larsen & Toubro (as on October 2018).
Why Greenex?
• It will measure the performances of companies in terms of carbon emissions.
• It will allow investors to track companies that invest in energy efficient practices
• Investors can invest in a mutual fund that invests in companies that form this Greenex.
• The Greenex will allow asset managers to create products to help investors put their
money in green enterprises.

Securities Transaction Tax (STT) is a tax being levied on all transactions done on the stock
exchanges at rates prescribed by the Central Government from time to time. Pursuant to the
enactment of the Finance (No.2) Act, 2004, the Government of India notified the Securities
Transaction Tax Rules, 2004 and STT came into effect from October 1, 2004.

BITCOIN: Bitcoin is a type of virtual currency, created in 2009 by an unknown person named
Satoshi Nakamoto. Transactions in this system are made with no middle men, banks or
regulator agency. They are a completely decentralized form of money and aren’t backed by
any government. People can use this digital currency for all sorts of real transactions.
Though each Bitcoin transaction is recorded in a public log, names of buyers and sellers are
never revealed – only their wallet IDs are revealed, keeping Bitcoin users’ transactions
private. The disadvantages of these currencies is that they are unregulated, there is
anonymity of the user and high volatility.
Crypto Currencies or Virtual Currencies are type of unregulated digital money. They are
mainly peer-to-peer system, and transacted between users directly, without an
intermediary. These transactions are verified by network nodes and recorded in public
distributed ledger called blockchain. They are neither issued by central bank/public
authority, nor is necessarily attached to fiat currency, but is used and accepted among the
members of a specific virtual community. They are being transferred, stored or traded
electronically.
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FIMMDA: The Fixed Income Money Market and Derivatives Association of India (FIMMDA), an
association of Scheduled Commercial Banks, Public Financial Institutions, Primary Dealers
and Insurance Companies was incorporated as a Company under section 25 of the Companies
Act, 1956 on May 4th, 1998. FIMMDA is a voluntary market body for the bond, money and
derivatives markets. Mission of FIMMDA:
• To further the interests of and regulate the dealings in fixed Income instruments, money
market instruments and derivatives.
• To recommend and implement healthy business practices, ethical code of conduct,
standard principles and practices to be followed by members.
• To facilitate introduction of new products and practices.

AMFI: The Association of Mutual Funds in India (AMFI) is dedicated to developing the Indian
Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain
standards in all areas with a view to protecting and promoting the interests of mutual funds
and their unit holders. AMFI, the association of SEBI registered mutual funds in India of all
the registered Asset Management Companies, was incorporated on August 22, 1995, as a non-
profit organization. As of now, all the 43 Asset Management Companies that are registered
with SEBI, are its members.

S&P BSE Bharat 22 Index: The S&P BSE Bharat 22 Index is designed to measure the
performance of 22 select companies disinvested by the central government of India.

S&P BSE 200 Index: It was introduced in 1993. The index is designed to measure the
performance of top 200 companies listed at BSE, based on size and liquidity across sectors.
At present it has 201 constituents and major constituents are HDFC Bank, Reliance
Industries, Housing Development Finance Corp and Infosys (As on October 2018).

Dollex: The BSE Dollex indices are Dollex 30, 100 and 200. Dollex-30, Dollex-100 and Dollex-
200 are calculated and displayed through BSE On-line trading terminals (BOLT) by taking into
account real-time rupee/US$ Exchange rate. Dollex-30, a dollar linked version of SENSEX,
was launched on July 25, 2001 whereas Dollex-200, a dollar version of BSE 200 index was
launched on May 27, 1994. BSE introduced Dollex-100, a dollar linked version of BSE-100
index, on May 22, 2006.
 SEBI Grade A Officer 6
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Margin Trading Facility: Margin Trading is trading with borrowed funds/securities. It is

essentially a leveraging mechanism which enables investors to take exposure in the market
over and above what is possible with their own resources. SEBI has been prescribing
eligibility conditions and procedural details for allowing the Margin Trading Facility from
time to time.
1. Corporate brokers with net worth of at least Rs.3 crore are eligible for providing Margin
trading facility to their clients subject to their entering into an agreement to that effect.
2. Before providing margin trading facility to a client, the member and the client have been
mandated to sign an agreement for this purpose in the format specified by SEBI.
3. It has also been specified that the client shall not avail the facility from more than one
broker at any time.
4. The facility of margin trading is available for Group 1 securities and those securities
which are offered in the initial public offers and meet the conditions for inclusion in the
derivatives segment of the stock exchanges.
5. For providing the margin trading facility, a broker may use his own funds or borrow from
scheduled commercial banks or NBFCs regulated by the RBI. A broker is not allowed to
borrow funds from any other source.
6. The "total exposure" of the broker towards the margin trading facility should not exceed
the borrowed funds and 50 per cent of his "net worth". While providing the margin trading
facility, the broker has to ensure that the exposure to a single client does not exceed 10
per cent of the "total exposure" of the broker.
7. Initial margin has been prescribed as 50% and the maintenance margin has been
prescribed as 40%.

Arbitration: Arbitration is an alternative dispute resolution mechanism provided by a stock

exchange for resolving disputes between the trading members and their clients in respect of
trades done on the exchange.
The byelaws of the exchange provide the procedure for Arbitration. You can procure a form
for filing arbitration from the concerned stock exchange. The arbitral tribunal has to make
the arbitral award within 3 months from the date of entering upon the reference. The time
taken to make an award cannot be extended beyond a maximum period of 6 months from
the date of entering upon the reference.
 SEBI Grade A Officer 7
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Investor Protection Fund (IPF) / Customer Protection Fund (CPF) at Stock Exchanges:
Investor Protection Fund is the fund set up by the Stock Exchanges to meet the legitimate
investment claims of the clients of the defaulting members that are not of speculative
nature. SEBI has prescribed guidelines for utilization of IPF at the Stock Exchanges. The
Stock Exchanges have been permitted to fix suitable compensation limits, in consultation
with the IPF/CPF Trust.
It has been provided that the amount of compensation available against a single claim of an
investor arising out of default by a member broker of a Stock Exchange shall not be less than
Rs. 1 lakh in case of major Stock Exchanges viz., BSE and NSE, and Rs. 50,000/- in case of
other Stock Exchanges.

BSE IndoNext: Regional stock exchanges (RSEs) have registered negligible business during the
last few years and thus small and medium-sized companies (SMEs) listed there find it
difficult to raise fresh resources in the absence of price discovery of their securities in the
secondary market. As a result, investors also do not find exit opportunity in case of such
companies.
BSE IndoNext has been formed to benefit such small and medium size companies (SMEs), the
investors in these companies and capital markets at large. It has been set up as a separate
trading platform under the present BSE Online Trading (BOLT) system of the BSE. It is a joint
initiative of BSE and the Federation of Indian Stock Exchanges (FISE).

SEBI Registered rating agencies in India:

1. CARE: Credit Analysis & Research Limited was established in 1993. It was promoted by
Industrial Development Bank of India (IDBI), Unit Trust of India (UTI) Bank, Canara Bank
and other financial institutions. CARE has its headquarters in Mumbai and regional offices
in New Delhi, Bangalore, Chennai, Hyderabad, Ahmedabad and Kolkata.

2. ICRA: Originally named as Investment Information and Credit Rating Agency, the
organisation was set up in 1991. It was a joint venture of Moody’s and Indian financial and
banking service organisations. It was renamed to ICRA Limited and was listed in the
Bombay Stock Exchange and National Stock Exchange in April 2007. It is headquartered in
Gurugram, Haryana. ICRA ratings are used to analyse the credit risk in India. It does not
cater to the international companies and organisations.
 SEBI Grade A Officer 8
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3. CRISIL: Credit Rating Information Services of India Limited and it was the first credit
rating agency set up in India in 1987. At the time of incorporation, the agency was
promoted by ICICI Limited, UTI and many such financial institutions. The agency started
operations in 1988. CRISIL is headquartered in Mumbai. The majority shareholder of
CRISIL is Standard & Poor’s, one of the biggest credit rating agencies of the world.

4. India Ratings and Research (Ind-Ra): It is a credit rating agency that provides time-
bound, accurate and prompt credit opinions. It is 100% owned subsidiary of the Fitch
Group (Fitch Ratings India Private Limited). Ind-Ra covers corporate issuers, financial
institutions, banks, insurance companies, urban local bodies, structured finance and
project finance. Fitch’s Ind-Ra is headquartered in Mumbai and has branch offices in
Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad and Kolkata. Ind-Ra is recognised by
SEBI, National Housing Bank and the Reserve Bank of India.

5. BWR: Brickwork Ratings India Private Limited, a SEBI registered Credit Rating Agency, has
also been accredited by RBI and empanelled by National Small Industries Corporation
(NSIC), offers Bank Loan, Commercial Paper, MSME ratings and grading services. NABARD
has empanelled Brickwork for Micro Financial Institutions (MFI) and Non-Governmental
Organisations (NGO) grading. BWR is accredited by Indian Renewable Energy Development
Agency Limited (IREDA) & the Ministry of New and Renewable Energy (MNRE),
Government of India, to grade companies seeking credit facilities from IREDA, Renewable
Energy Service providing Companies (RESCOs) and System Integrators (SIs). Brickwork
Ratings founded by bankers, credit rating professionals, former regulators as well as
professors, is committed to promoting Financial Literacy. Brickwork Ratings has Canara
Bank, a leading Public Sector Bank, as its promoter and strategic partner. BWR has its
corporate office in Bengaluru.

6. SMERA: Small and Medium Enterprises Rating Agency of India Limited, pioneered in SME
rating in India, was founded in 2005 by Small Industries Development Bank of India
(SIDBI), Dun and Bradstreet Information Services India Private Limited (D&B) and various
public, private sector and other MNC banks of India. The agency has its headquarters in
Mumbai. SMERA has been registered with SEBI as a credit rating agency and accredited by
Reserve Bank of India in 2012.
 SEBI Grade A Officer 9
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Merchant Banker:
1. A Merchant Banker is required to pay fees, as per Schedule II of the SEBI (Merchant
Bankers) Regulations, 1992, as mentioned below:
a. Application fee (Initial and permanent registration) - Rs. 50,000/-
b. Initial Registration - Rs. 20,00,000/-
c. Permanent Registration - Rs. 9,00,000/-
2. A Merchant Banker is required to have a minimum networth of not less than Rs. 5 Crores.
3. The Certificate of Initial Registration remains valid for 5 years. The Merchant Banker has
to apply for grant of Certificate of Permanent Registration to SEBI, 3 months before the
expiry of the validity of the Certificate of Initial Registration, if it wishes to continue as a
registered Merchant Banker.
4. The Certificate of Permanent Registration shall be permanent unless suspended or
cancelled by the Board. But again, in order to keep Certificate of Permanent Registration
in force, a Merchant Banker has to pay the fees as per the Schedule II every 3 years, 3
months before expiry of the previous fee block.

SARFAESI Act 2002: Securitization and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 (SARFAESI) was circulated – to regulate securitization and
reconstruction of financial assets, enforcement of the security interest and for matters
connected therewith or incidental thereto. The Act extends to whole of India. ARC, the first
asset reconstruction company, was established under this act. The Act provides provisions
for the formation and actions of Asset Securitization Companies as well as Reconstruction
Companies. RBI regulates the institutions established under the SARFAESI Act.
The prime objectives of the SARFAESI Act under Insolvency Law in India are as follows:
• The Act details the procedures for NPAs’ transfer to the asset reconstruction companies
for the purpose of asset reconstruction.
• The Act specifies the legal framework for scanning activities in India.
• The Act confers powers to the financial institutions to take custody of the immovable
property, which is charged or hypothecated, for debt recovery.
• The Act imposes the security interest without any intervention from the court.
The SARFAESI Act sanctions three processes to recover Non-Performing Assets as follows:
• Securitization
• Asset reconstruction
• Security Enforcement without court’s intervention
 SEBI Grade A Officer 10
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Indian Stock Market Scams:

Estimated Central
Modus Operandi
Size figure
Satyam Rs. 7000 Ramalinga The top management of the software company
Scam Cr. Raju manipulated accounts to show inflated sales, profits
(2009) and margins from 2003 to 2008.
NSEL Scam Rs. 5,600 Jignesh Investors were wooed by offering fixed returns on
(2013) Cr. Shah paired contracts with agri and industrial
commodities as underlying. Stocks were missing and
money was allegedly siphoned by so-called
borrowers.
NSEL: National Spot Exchange Limited
Harshad Rs. 4,000 Harshad Used money from banks to make personal gains via
Mehta Scam Cr. Mehta investment in shares. He triggered rise in BSE in
(1992) 1992 by trading in shares at premium across many
segments.
CRB Scam Rs. 1,200 C. R. Raised public money through Fixed Deposits, Mutual
(1996) Cr. Bhansali Funds and debentures via non-existent firms and
invested them in stocks for personal gains.
Ketan Rs. 800 Cr. Ketan Circular trading in selected stocks via borrowed
Parekh Parekh money from banks to manipulate share prices.
Scam Circular trading in stock market refers to a
(2001) fraudulent trading scheme where buy/sell orders
are entered by a person or by persons acting in
collusion with each other to operate the price of
the underlying security.
 SEBI Grade A Officer 11
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SEBI RECENT CIRCULARS

Participation of Eligible Foreign Entities (EFEs) in the commodity derivatives market:

Currently, foreign entities are not permitted to directly participate in the Indian commodity
derivatives market, even if they import/export various commodities from/to India. Such
entities by virtue of their actual exposure to the various commodities in Indian market, are
valuable stakeholders in the value chain of such commodities, and are also exposed to price
uncertainty of Indian commodity markets.

It has been decided to permit foreign entities having actual exposure to Indian commodity
markets, to participate in the commodity derivative segment of recognized stock exchanges
for hedging their exposure. Such foreign entities shall be known as ‘Eligible Foreign Entities’.

NRIs/ OCIs/ Resident Indians (RIs) shall be allowed to be constituents of Foreign Portfolio
Investors (FPIs) subject to the following conditions:
a. Contributions by NRI/ OCI/ RI including those of NRI/ OCI/ RI controlled Investment
Manager should be below 25% from a single NRI/ OCI/ RI and in aggregate should be
below 50% to corpus of FPI.
Resident Indian’s contribution permitted is that made through Liberalized Remittance
Scheme (LRS) approved by RBI in global funds whose Indian exposure is less than 50%.
b. NRI/ OCI/ RI should not be in control of FPI.
The restriction that NRI/ OCI/ RI should not be in control of FPI shall also not apply to
FPIs which are ‘offshore funds’ for which no-objection certificate has been provided by
the Board in terms of SEBI (Mutual Funds) Regulations, 1996.

FPIs can be controlled by investment managers (IMs) which are controlled and / or owned
by NRI/ OCI/ RI if following conditions are satisfied:
a. IM is appropriately regulated in its home jurisdiction and registers itself with SEBI as non-
investing FPI; or
b. IM is incorporated or setup under Indian laws and appropriately registered with SEBI.

 A non-investing FPI may be directly or indirectly fully owned and/ or controlled by a NRI/
OCI/ RI.
 These restrictions in regard to eligibility conditions will not be applicable to FPIs
investing only in mutual funds in India.
 Existing FPIs and new applicants shall be given a time period of two years from the date
of coming into force of the amended regulations or from the date of registration,
 SEBI Grade A Officer 12
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whichever is later in order to satisfy these eligibility conditions. In case of temporary

breach, a time period of 90 days will be given to ensure compliance with above
conditions.

Securities and Exchange Board of India (Credit Rating Agencies) (Second

Amendment) Regulations, 2018: A CRA may undertake the rating of financial instruments
under the respective guidelines of the financial sector regulators/ authorities as specified
below:
1. Securities and Exchange Board of India
2. Reserve Bank of India
3. Insurance Regulatory and Development Authority of India
4. Pension Fund Regulatory and Development Authority
5. Ministry of Corporate Affairs
6. Insolvency and Bankruptcy Board of India
CRAs may also undertake research activities, incidental to rating, such as research for
Economy, Industries and Companies.

Extension of Trading hours of Securities Lending and Borrowing (SLB) Segment:

With a view to facilitate physical settlement of equity derivatives contracts, it has been
decided to permit Stock Exchanges to set their trading hours in the SLB Segment, subject to
the condition that:
a) The trading hours are between 9 AM and 5 PM, and
b) The Exchange/Clearing Corporation has in place risk management system and
infrastructure commensurate to the trading hours.

Role of Sub-Broker (SB) vis-à-vis Authorized Person (AP):

1. Under the current regulatory framework, Sub-Brokers (‘SB’) need to seek registration
from SEBI under SEBI (Stock Broker and Sub-Broker) Regulations, 1992, and Authorized
Persons (‘AP’) need to seek registration from the concerned Exchange. There is no
difference in the operative role of a Sub-Broker and that of an Authorized Person.
2. SEBI Board in its meeting held on June 21, 2018 decided to discontinue with Sub-Broker as
an intermediary to be registered with SEBI.
3. In view of the same, the need for the category of Sub-Broker as a market intermediary
may no longer be required. Therefore, it is decided that-
 SEBI Grade A Officer 13
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a) No fresh registration shall be granted to any person as Sub-Broker. Any pending

applications for registration as Sub-Brokers under process, shall be returned to the
concerned Stock Exchanges for onward transmission to the applicant.
b) The registered Sub-Brokers shall have time till March 31, 2019 in order to migrate to
act as an AP and/ or Trading Member (TM). The Sub-Brokers, who do not choose to
migrate into AP and /or TM, shall deemed to have surrendered their registration with
SEBI as Sub-Broker, w.e.f. March 31, 2019.
c) Consequent upon migration/ deemed surrender, the certificate of registration granted
to the Sub-Brokers by SEBI shall stand withdrawn.

Discontinuation of acceptance of cash by Stock Brokers:

1. Government of India has promoted various means for transfer / receipt of funds through
digital mode for encouraging a cashless economy. Financial institutions/ Banks have
introduced various modes of electronic payment facility including mobile banking, Unified
Payment Interface (UPI) etc.
2. In view of the various modes of payment through electronic means available today, it is
directed that Stock Brokers shall not accept cash from their clients either directly or by
way of cash deposit to the bank account of stock broker. All payments shall be received/
made by the stock brokers from/ to the clients strictly by account payee crossed
cheques/ demand drafts or by way of direct credit into the bank account through
electronic fund transfer, or any other mode permitted by RBI. The stock brokers shall
accept cheques drawn only by the clients and also issue cheques in favour of the clients
only, for their transactions.

Overseas Investment by Alternative Investment Funds/ Venture Capital Funds:

1. SEBI (Alternative Investment Funds) Regulations, 2012 were notified on May 21, 2012
repealing and replacing the erstwhile SEBI (Venture Capital Funds) Regulations, 1996.
Further, SEBI on October 01, 2015 had allowed overseas investment by AIFs and VCFs to
the extent of USD 500 million.
2. In consultation with RBI, it is now decided to enhance the said limit to USD 750 million.
3. In order to monitor the utilization of overseas investment limits, it is decided that AIFs/
VCFs shall mandatorily disclose the following
a. AIFs/ VCFs shall report the utilization of the overseas limits within 5 working days of
such utilization on SEBI intermediary portal at https://siportal.sebi.gov.in.
b. AIFs/ VCFs shall also report the following through SEBI intermediary portal:
 SEBI Grade A Officer 14
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In case an AIF / VCF has not utilized the overseas limit granted to them within a
period of 6 months from the date of SEBI approval (hereinafter referred to as ‘validity
period’), the same shall be reported within 2 working days after expiry of the validity
period;
In case an AIF / VCF has not utilized a part of the overseas limit within the validity
period, the same shall be reported within 2 working days after expiry of the validity
period;
c. In case an AIF/ VCF wishes to surrender the overseas limit at any point of time within
the validity period, the same shall be reported within 2 working days from the date of
decision to surrender the limit.

Total Expense Ratio – Change and Disclosure:

1. Asset Management Companies (AMCs) shall prominently disclose on a daily basis, the TER
(scheme-wise, date-wise) of all schemes under a separate head “Total Expense Ratio of
Mutual Fund Schemes” on their website and on the website of AMFI in downloadable
spreadsheet.
2. Any change in the base TER (i.e. TER excluding additional expenses provided in SEBI
(Mutual Funds) Regulations, 1996 and Goods and Services Tax on investment and advisory
fees) in comparison to previous base TER charged to any scheme/plan shall be
communicated to investors of the scheme/plan through notice via email or SMS at least
three working days prior to effecting such change. Further, the notice of such change
shall be updated on the website at least three working days prior to effecting such
change. Provided that any decrease in TER in a mutual fund scheme due to various
regulatory requirements, would not require issuance of any prior notice to the investors.
 SEBI Grade A Officer 15
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GLOSSARY

Adhoc Margin Margin collected by the Stock Exchange from the members having unduly
large outstanding position or the margin levied on volatile scrips based on
adhoc basis keeping in view the risk perspective.
AMBI Association of Merchant Bankers in India
AMFI Association of Mutual Funds in India
Arbitration An alternative dispute resolution mechanism provided by a stock exchange
for resolving disputes between the trading members and their clients in
respect of trades done on the exchange.
Baby Bond A bond with a face value of less than $1000 usually in $100 denominations.
(U.S)
Badla Carrying forward of transactions from one settlement period to another
without effective delivery. This is permitted only in specified securities and
is done at the making up price which is usually the closing price of the last
day of settlement.
Bail out of When the public issue do not get good response from the public or fails to
issue garner minimum subscription, the issuer or promoters approaches the
financiers or some persons to arrange subscription to bail out the issue for
consideration of buy-back shares subsequent from the financiers at higher
price or compensating the financier by payment of interest on the amount of
the subscription money paid in the public issue.
Bearer Securities which do not require registration of the name of the owner in the
Securities/ books of the company. Both the interest and the principal whenever they
Bearer Bonds become due are paid to anyone who has possession of the securities. No
endorsement is required for changing the ownership of such securities.
Beta A measure of the volatility of a stock relative to the market index in which
the stock is included. A low beta indicates relatively low risk; a high beta
indicates a high risk.
Bid An offer of a price to buy as in an auction. Bid also refers to the price one is
willing to pay for a security.
Bid – Ask The difference between the bid price and the ask price.
spread
Black-Scholes A mathematical model that provides a valuation technique for options. The
model model was adapted to provide a framework for valuing options in futures
contracts.
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Bucketing A situation where, in an attempt to make a short-term profit, a broker

confirms an order to a client without actually executing it.
If the eventual price that the order is executed at is higher than the price
available when the order was submitted, the customer simply pays the higher
price.
On the other hand, if the execution price is lower than the price available
when the order was submitted, the customer pays the higher price and the
brokerage firm pockets the difference.
Bulldog Bond A bond denominated in sterling but issued by a non British borrower.
Churning An unethical practice employed by some brokers to increase their
commissions by excessively trading in a client’s account. In the context of
the stock market, churning refers to a period of heavy trading with few
sustained price trends and little movement in stock market indices.
Circuit A system to curb excessive speculation in the stock market, applied by the
Breaker Stock Exchange authorities, when the index spurts or plunges by more than a
specified per cent. Trading is then suspended for some time to let the market
cool down.
Circular A fraudulent trading scheme where sell or buy orders are entered by a person
trading who knows that the same number of shares at the same time and for the
same price either have been or will be entered. These trades do not
represent a real change in the beneficial ownership of the security. These
trades are entered with the intention of raising or depressing the prices of
securities.
EDGAR EDGAR (Electronic Data Gathering, Analysis and Retrieval System) is an
electronic system formulated by Securities Exchange Commission, USA, which
is used by companies to transmit documents required by SEC relating to
corporate offerings and ongoing disclosure obligations.
EDIFAR EDIFAR is Electronic Data Information Filing and Retrieval system. SEBI in
association with National Informatics Centre (NIC) has set up the EDIFAR to
facilitate filing of certain documents/statements by the listed companies
online on the Web site. This would involve electronic filing of information in
a standard format by the companies.
Gilt fund Fund that invests exclusively in government securities.
GLOBEX A global after-hours electronic trading system.
Green shoe Green Shoe option means an option of allocating shares in excess of the
option shares included in the public issue and operating a post-listing price
stabilizing mechanism in accordance with the specific provisions in Disclosure
and Investor Protection (DIP) Guidelines, which is granted to a company to be
exercised through a stabilizing Agent.
ISIN ISIN (International Securities Identification Number) A unique identification
number allotted for each security in the depository system by SEBI.
ISO 15022 Common messaging standard adopted for electronic trades under Straight
through Processing (STP) system.
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Jitney Describes a situation where one broker who has direct access to a stock
exchange performs trades for a broker who does not have access. A
fraudulent activity in the penny stock market. It occurs when two brokers
work together by trading a stock back and forth to rack up commissions and
give the impression of trading volume. Jitney or “the jitney game” is
basically the same thing as circular trading.
Jobber Member brokers of a stock exchange who specialize, by giving two way
quotations, in buying and selling of securities from and to fellow members.
Jobbers do not have any direct contact with the public but they serve the
useful function of imparting liquidity to the market.
Leverage The use of borrowed money to finance an investment.
Leveraged The purchase of shares usually by the management of a company using its
Buyout own assets as collateral for loans provided by banks or insurance company.
Negotiated Electronic platform for facilitating dealing in Government Securities and
Dealing Money Market Instruments, introduced by RBI.
System (NDS)
Plain vanilla The most common and generally the simplest types of derivatives
transactions transaction. Plain vanilla is a relative concept, and no precise list of plain
vanilla transactions exists. Transactions that have unusual or less common
features are often called exotic or structured.
Ponzi The scheme begins with a person setting up as a deposit taking institution
Scheme (Chit fund, Mutual fund, or CIS, etc). The person then invites the public to
place deposits with the institution, and offers them a generous rate of
interest. The interest to old depositors is then paid out of new depositors’
money. The whole scheme collapses when there are not enough new deposits
coming in to cover the interest payment due on the old ones.
Red Herring A preliminary prospectus filed with the Securities and Exchange Commission
in the United States in order to test the market’s reaction to a proposed new
issue of securities. In Indian scenario, Red Herring is a draft prospectus which
is used in book built issues. It contains all disclosures except the price and is
used for testing the market reaction to the proposed issue.
Stagflation The combination of sluggish economic growth, high unemployment and high
inflation.
Stagnation Period of low volume and inactive trading on the securities market.
Tailgating When a broker or advisor purchases or sells a security for their client(s) and
then immediately does the same transaction in his/her own account. This is
not illegal like front running, but is still considered to be unethical because
the broker is usually placing a trade for his/her own account based on what
the client knows (like inside information).