CMA Final · Corporate and Economic Laws

SEBI Laws and Regulations: formula sheet

Full chapter guide

Key formulas

Core duty: Section 11(1): protect investors + promote development + regulate the securities market; Measures are 'as it thinks fit', subject to the Act.
Section 11(2) is illustrative: Measures 'without prejudice to the generality' of Section 11(1); The list does not limit SEBI's general duty.
Civil court powers: Section 11(3): discovery and production of documents; summoning and examining on oath; inspection; issuing commissions; Used while exercising clause (i) or (ia) of Section 11(2) or Section 11(2A).
Interim and directive orders: Section 11(4): suspend trading, restrain access to market, suspend office-bearers, impound proceeds, attach for up to 90 days, direct non-disposal; Reasons in writing; hearing before or after the order.
Attachment confirmation: Attachment ≤ 90 days unless confirmed by the Special Court under Section 26A; Only property or accounts tied to proceeds actually involved in the violation can be attached.
Penalty power: Section 11(4A): penalty under listed sections (15A to 15HB) after an inquiry in the prescribed manner; Order must record reasons in writing.
Disgorgement: Disgorged amount → Investor Protection and Education Fund (Section 11(5)); Applies to directions under Section 11B, Section 12A of SCRA and Section 19 of the Depositories Act.
Laying before Parliament (Section 31, SEBI Act): Every rule and every regulation → laid before each House, while in session → total 30 days (one or more successive sessions); Applies to both rules and regulations. The 30 days can be split across successive sessions.
Parliament's power after laying: Both Houses agree to modify → effect only in modified form; both Houses agree it should not be made → no effect; Needs agreement of both Houses, before the expiry of the session immediately following. Past acts remain valid.
Application of other laws (Section 32, SEBI Act): SEBI Act = in addition to, and not in derogation of, any other law for the time being in force; The Act supplements other laws. It does not replace them.
Who makes what (SCRA, 1956): Rules: Central Government (Section 30). Regulations: SEBI, by notification in the Official Gazette (Section 31); SCRA regulations must be consistent with the Act and its rules.
Parallel provisions in the Depositories Act, 1996: Section 27 = laying before Parliament (30 days). Section 28 = in addition to other law on holding and transfer of securities; Section 28 is narrower in wording than Section 32 of the SEBI Act.
Appeal to SAT under SEBI Act (Section 15T): Appeal within 45 days from receipt of the copy of the order; Applies to orders of SEBI, adjudicating officers, IRDA and PFRDA. SAT may entertain a late appeal if there was sufficient cause. No outer limit for the delay is stated in the text.
Appeal to SAT under Depositories Act (Section 23A): Appeal within 45 days from receipt of the copy of the order; Covers orders of SEBI (the Board) and of an adjudicating officer under that Act. Late appeal allowed for sufficient cause.
Appeal to SAT under SCRA (Section 23L): Appeal within 45 days from receipt of the order or decision; Covers orders or decisions of a recognised stock exchange, an adjudicating officer, and certain SEBI orders (Section 4B, Section 23-I(3)).
Appeal against refusal to list (SCRA Section 22A): Appeal within 15 days from the date reasons for refusal are furnished; The company is entitled to reasons. Where the exchange fails to dispose of the application in time, 15 days run from expiry of the specified time, extendable by SAT by up to one month for sufficient cause.
Time to dispose of appeal by SAT: Endeavour to dispose of finally within 6 months from receipt; Common to Sections 15T, 23A, 23L and 22A.
Appeal to Supreme Court (SEBI Act Section 15Z; Depositories Act Section 23F): Within 60 days from communication of SAT order; question of law only; condonation up to a further 60 days; The Supreme Court may allow filing within a further period not exceeding 60 days if sufficient cause is shown.
Appeal to High Court (SCRA Section 22F): Within 60 days from communication of SAT order; question of fact or law; condonation up to a further 60 days; Do not mix this with the Supreme Court route under the SEBI and Depositories Acts.
Section 3(1): application: Stock exchange → application in prescribed manner → Central Government; Only an exchange desirous of being recognised applies.
Section 3(2): contents of application: Prescribed particulars + bye-laws + rules on constitution of the exchange; Rules cover governing body, office bearers, classes of members and their qualifications, exclusion/suspension/expulsion/re-admission, registration of partnerships as members, and authorised representatives and clerks.
Section 4(1): three satisfaction tests: (a) rules/bye-laws conform to prescribed conditions for fair dealing and investor protection + (b) willing to comply with other conditions + (c) in interest of trade and public interest; All three are needed before the Government may grant recognition.
Section 4(2): prescribed conditions may include: Membership qualifications; manner of entering and enforcing contracts between members; Central Government representation (not more than three persons); members' accounts and audit by Chartered Accountants where required; The list says 'among other matters', so it is not exhaustive.
Section 4(3): publication: Gazette of India + State Official Gazette (State of principal office); effective from date of publication in Gazette of India; Effect is from the Gazette of India date.
Section 4(4): refusal: Refusal only after hearing + reasons communicated in writing; Natural justice safeguard.
Section 4(5): amendment of rules: Rules on Section 3(2) matters amended only with Central Government approval; Applies to a recognised stock exchange.
SEBI Act Section 2(1)(i) and 2(2): 'securities' = meaning in Section 2 of SCRA; undefined words take SCRA or Depositories Act meanings; The securities definition itself sits in the SCRA, not the SEBI Act.
Bye-laws of exchange: Recognised stock exchange + previous approval of SEBI → bye-laws for regulation and control of contracts (section 9(1)); Effective from date of publication in Gazette of India after SEBI approval; SEBI may dispense with previous publication by written order giving reasons.
Punishment for bye-law breach: Fine | expulsion | suspension for a specified period | any like non-monetary penalty (section 9(3)(b)); These are bye-law penalties on members, not court penalties.
Spot delivery contracts: Sections 13, 14, 15 and 17 do not apply (section 18(1)); Central Government may apply section 17 by notification (section 18(2)); Condition: expedient in the interest of trade or public interest.
Valid derivative contract: Traded on recognised exchange AND settled via its clearing house/rules or bye-laws; or parties and terms notified by Central Government (section 18A); Operates notwithstanding any other law.
Commodity derivatives: Non-transferable specific delivery contracts are outside the Act (section 30A(1)), subject to proviso and Central Government notification power; Government can also exempt transferable specific delivery contracts in section 13 areas.
SEBI powers on offer documents: Section 11A: regulations on issue of capital and disclosures; orders to prohibit or condition prospectus, offer document or advertisement; listing requirements; Applies for the protection of investors, without prejudice to the Companies Act and SCRA section 21.

Quick revision

SEBI is the securities market regulator under the SEBI Act, 1992.
SEBI's role covers investor protection, market development and market regulation.
A recognised stock exchange may make bye-laws only with SEBI's previous approval (SCRA section 9).
Bye-laws may cover trading hours, clearing house, margins, listing, dispute settlement, fees and fines.
Penalties for bye-law breach: fine, expulsion, suspension for a specified period, or a like non-monetary penalty.
Approved bye-laws are published in the Gazette of India and take effect from that publication date.
SEBI may dispense with previous publication by written order giving reasons, where trade or public interest needs immediate bye-laws.
An application for recognition goes to the Central Government with the bye-laws and the rules on the exchange's constitution (SCRA section 3).
A company refused listing must be given reasons and can appeal to the tribunal within fifteen days of receiving them (section 22A).
The tribunal should try to dispose of a listing appeal within six months of receiving it.
The tribunal is not bound by the Code of Civil Procedure, 1908, but follows natural justice (SCRA section 22B, Depositories Act section 23B).
Tribunal proceedings are deemed judicial proceedings, and it has civil court powers such as summoning and receiving affidavit evidence.

Common mistakes

Treating the Section 11(2) list as complete. Fix: Write that the measures are 'without prejudice to the generality' of Section 11(1), so SEBI may take other measures it thinks fit, subject to the Act.
Saying SEBI can attach property indefinitely. Fix: State that attachment under Section 11(4)(e) is for up to ninety days, and continues only if the Special Court under Section 26A confirms it within that time.
Saying only regulations are laid before Parliament. Fix: Remember the words 'every rule and every regulation'.
Writing the laying period as 30 days of one session. Fix: Write 'a total period of thirty days, which may be in one session or two or more successive sessions'.
Saying the appeal against a SAT order always goes to the Supreme Court. Fix: Under the SEBI Act and the Depositories Act it is the Supreme Court. Under SCRA Section 22F it is the High Court.
Mixing up 45 days and 60 days. Fix: 45 days is for the first appeal to SAT. 60 days is for the appeal from SAT to the higher court.
Saying recognition is granted by SEBI. Fix: Under the text of Sections 3 and 4, the application goes to and recognition is granted by the Central Government.
Treating the three tests of Section 4(1) as alternatives. Fix: State that the Government must be satisfied on all three: (a), (b) and (c).
Saying exchanges can make bye-laws on their own. Fix: Always write previous approval of SEBI, and effect from publication in the Gazette of India.
Treating spot delivery contracts as fully outside the SCRA. Fix: Say only sections 13, 14, 15 and 17 are excluded, and the Central Government can apply section 17 by notification.

Exam tips

Learn Section 11(1) word for word in simple form. It opens most descriptive answers.
For MCQs, expect questions on the ninety-day attachment, Special Court confirmation and civil court powers under Section 11(3).
In case scenarios, always mention written reasons and the hearing before concluding that SEBI's order stands.
Group the Section 11(2) measures into intermediaries, market conduct and supportive functions so you can recall them quickly.
Do not quote section numbers you are unsure of. Use only the ones in this guide.
Quote the key phrases exactly: 'every rule and every regulation', 'thirty days' and 'in addition to, and not in derogation of'.
In MCQs, watch for options that say 'either House' or 'one session only'. Both are wrong on the text.
Add the section number to every answer. Examiners reward precision.