CS Executive · Capital Market and Securities Laws

Securities and Exchange Board of India: formula sheet

Full chapter guide

Key formulas

Short title: Section 1(1): Securities and Exchange Board of India Act, 1992; Write the full name. Do not shorten it to 'SEBI Act' in a question on the short title.
Extent: Section 1(2): extends to the whole of India; No part of India is excluded in the text supplied.
Commencement: Section 1(3): deemed in force from 30 January 1992; Say 'deemed'. It is a retrospective start date, tied to the Ordinance.
Repeal and saving: Section 35: Ordinance, 1992 repealed; actions under it deemed taken under the Act; Explains why the Act can be deemed to start on 30 January 1992.
Establishment: Board established by Central Government notification, from the date it appoints (Section 3(1)); The Board is created for the purposes of this Act under the name Securities and Exchange Board of India.
Legal status: Body corporate = perpetual succession + common seal (Section 3(2)); Remember these two features first. They are the usual question.
Powers as a body corporate: Acquire, hold and dispose of property (movable and immovable) + contract + sue or be sued (Section 3(2)); These powers are subject to the provisions of the Act.
Head office: Head office at Bombay (Section 3(3)); The Act names Bombay.
Other offices: Board may establish offices at other places in India (Section 3(4)); The word is 'may'. Other offices are optional.
Board strength: 1 Chairman + 2 Central Government officials + 1 RBI official + 5 other members = 9; Section 4(1)(a) to (d). Of the five other members, at least three are whole-time.
Who appoints: Chairman and clause (d) members: appointed by Central Government. Clause (b) members: nominated by Central Government. Clause (c) member: nominated by RBI.; Section 4(4).
Eligibility of Chairman and clause (d) members: Ability, integrity and standing + capacity in securities market problems OR special knowledge or experience of law, finance, economics, accountancy, administration or other useful discipline; Section 4(5). The Central Government forms the opinion on other useful disciplines.
Management of affairs: General superintendence, direction and management vest in the Board of members; Chairman also has powers of general superintendence and direction, save as regulations determine; Section 4(2) and 4(3).
Term and removal: Terms as prescribed; Central Government may terminate Chairman or clause (d) member on 3 months' written notice or 3 months' salary and allowances; member may relinquish office on 3 months' written notice; Section 5(1) and 5(2).
Casting vote: Decisions by majority of members present and voting; on a tie the Chairman (or presiding person) has a second or casting vote; Section 7(3).
Section 10(1)(a): references: Reference to existing Board in any law (other than the Act), contract or instrument = reference to the Board; Applies from the date of establishment of the Board.
Section 10(1)(b): property: All properties and assets, movable and immovable → vest in the Board; The word is 'vest'. No separate transfer deed is needed.
Section 10(1)(c) and (d): rights, liabilities, contracts: Rights and liabilities transferred; debts, obligations, contracts → deemed incurred or entered into by the Board; Clause (d) covers matters existing immediately before that date.
Section 10(1)(e) and (f): dues and proceedings: Sums due → due to the Board; suits and proceedings → may be continued or instituted by or against the Board; Covers proceedings already pending and those that could have been instituted.
Section 10(1)(g): employees: Same tenure and terms; may opt out within 6 months from that date; Terms include remuneration, leave, provident fund, retirement and other terminal benefits.
Section 10(2): no compensation: Absorption in regular service → no compensation under the Industrial Disputes Act, 1947 or other law; No court, tribunal or other authority can entertain such a claim.

Quick revision

SEBI Act, 1992 is cited by its short title in section 1; it extends to the whole of India.
The Act is deemed to have come into force on 30 January 1992.
The Board is established under section 3 from a date the Central Government appoints by notification.
The Board is a body corporate with perpetual succession and a common seal.
It can acquire, hold and dispose of movable and immovable property, contract, and sue or be sued.
The head office is at Bombay; the Board may set up offices at other places in India.
The existing Securities and Exchange Board was constituted under a Government of India resolution dated 12 April 1988.
Section 10: the existing Board's property, rights, liabilities, contracts and dues pass to the new Board.
Legal proceedings by or against the existing Board may be continued or started by or against SEBI.
Employees continue on the same terms, unless they opt out within six months.
Absorption of employees gives no right to compensation under the Industrial Disputes Act, 1947 or other law.
Section 5(2): the Central Government can terminate the Chairman or a member appointed under section 4(1)(d) on three months' written notice or three months' salary and allowances in lieu; they may relinquish office on three months' written notice.

Common mistakes

Saying the Act was passed on 30 January 1992. Fix: Write that the Act is deemed to have come into force on 30 January 1992. The date goes back to the Ordinance.
Writing that the Act extends to India except some States or only to the stock exchanges. Fix: Quote Section 1(2): it extends to the whole of India.
Saying SEBI was established directly by the Act on a fixed date. Fix: Write that the Board is established from the date the Central Government appoints by notification under Section 3(1).
Writing that the head office is at Mumbai only, or naming another city. Fix: Quote the Act: head office at Bombay. You may add that it is now Mumbai.
Citing Section 3 for the composition of the Board. Fix: Section 3 establishes and incorporates the Board. Composition is in Section 4(1). Cite both where relevant.
Saying the Board has only Chairman, Government, RBI and whole-time members, or giving a wrong total. Fix: Remember 1-2-1-5, total nine. Of the five, at least three are whole-time.
Treating the old SEBI as a statutory body or saying it was abolished with its affairs left unsettled. Fix: Write that the old body was non-statutory and that Section 10 passes its assets, liabilities and staff to the Board.
Saying employees were automatically and compulsorily transferred. Fix: State that employees continue on the same terms unless they opt out within six months from that date.

Exam tips

Learn the three sub-sections of Section 1 by number. Questions often ask 'under which section' or 'state the extent'.
Always use the word 'deemed' for commencement and explain it in one line with Section 35.
In a background question, give the reason (non-statutory to statutory) and avoid dates or numbers you cannot verify.
Write in ICSI style: provision, facts or analysis, then a clear conclusion. Even a 3-mark answer should cite the section.
Link this topic to the establishment and composition of SEBI, since questions often move from Section 1 to those provisions.
Write the section number with every point. ICSI-style answers expect the provision cited.
Learn the features of a body corporate as a list: perpetual succession, common seal, property, contract, sue or be sued.
Use the exact words 'Bombay' for the head office, and add 'now Mumbai' only as a note.