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NISM-Series-XV: Research Analyst · Legal and Regulatory Environment (NISM XV)

Securities Laws: SCRA, SEBI Act and Companies Act

Updated 11 October 2026 · Fact-checked

Three Acts form the core of securities law in India. The Securities Contracts (Regulation) Act, 1956 regulates stock exchanges and trading in securities. The SEBI Act, 1992 creates SEBI and gives it powers to protect investors and regulate the market. The Companies Act, 2013 governs how companies are formed, run and raise money.

Understand Securities Laws: SCRA, SEBI Act and Companies Act

India's securities market runs on three main laws. Each one covers a different area. If you remember who does what, most questions become easy.

The Securities Contracts (Regulation) Act, 1956 (SCRA) regulates the trading side. It deals with recognition of stock exchanges, the listing of securities, and contracts in securities. It also defines what a security is for the purpose of the Act, covering items like shares, scrips, bonds, debentures, units of mutual funds and government securities. Stock exchanges must be recognised by the Central Government under this Act. Listing of securities and rules for contracts in securities flow from it.

The SEBI Act, 1992 set up the Securities and Exchange Board of India as a statutory body. Its purpose, in plain words, is to protect the interests of investors in securities, to promote the development of the securities market, and to regulate the market. SEBI registers and regulates intermediaries such as brokers, merchant bankers, mutual funds and research analysts. It also prohibits fraudulent and unfair trade practices and insider trading. SEBI can make regulations, issue directions, conduct inquiries and impose penalties. Appeals against SEBI orders go to the Securities Appellate Tribunal (SAT).

The Companies Act, 2013 covers the company itself: incorporation, share capital, prospectus, directors, board and meetings, audit, and winding up. It matters to capital markets because companies raise money by issuing shares and debentures. For listed companies, SEBI's rules sit on top of the Act. In issues of securities to the public and in the listing of securities, SEBI administers the relevant provisions.

For a research analyst, these laws explain why companies must disclose information, why exchanges are regulated, and why the analyst must follow SEBI's rules. Read the three Acts as three layers: the Companies Act for the company, SCRA for the exchange and trading, and the SEBI Act for the regulator and its powers.

Key formulas to remember

SCRA, 1956: core scope
SCRA = recognition of stock exchanges + listing + regulation of contracts in securities
Think of SCRA as the trading and exchange law. Exchanges need recognition from the Central Government.
SEBI Act, 1992: three purposes
Protect investors + Develop the market + Regulate the market
Exam options often swap these with unrelated aims, such as fixing share prices or guaranteeing returns. SEBI does neither.
SEBI's powers
Regulation-making + Registration of intermediaries + Inquiry and investigation + Directions + Penalties
SEBI has quasi-legislative, quasi-judicial and executive roles.
Appeal route
SEBI order → Securities Appellate Tribunal (SAT)
SAT hears appeals against SEBI orders. Further appeal on a point of law goes to the Supreme Court.
Companies Act, 2013: scope
Incorporation + Share capital + Prospectus + Directors and governance + Audit + Winding up
It governs the company. SEBI governs listed-company conduct in the market.
One-line map
Company → Companies Act; Exchange and trading → SCRA; Regulator → SEBI Act
Use this to eliminate wrong options fast.

How to solve Securities Laws: SCRA, SEBI Act and Companies Act questions

Use this method for any question on the three securities laws. It works for definition, power and 'which Act' questions.

  1. 1Read the question and mark the key noun: company, exchange, listing, intermediary, regulator, penalty or appeal.
  2. 2Link that noun to an Act using the map: company to Companies Act, exchange or listing to SCRA, regulator or intermediary to SEBI Act.
  3. 3Check what the question asks: purpose, power, definition or procedure.
  4. 4Cross out options that promise returns, fix prices or guarantee profits. No securities law does that.
  5. 5Cross out options that give the power to the wrong body, for example a stock exchange acting as regulator in place of SEBI.
  6. 6Watch for absolute words like 'only', 'always' and 'never'. They often signal a trap.
  7. 7Pick the option that matches the Act's plain-words purpose. If two seem right, choose the more specific one.

Quickest way: Three-Act map

When to use it: Use when you have under a minute and the question asks which Act covers something.

  1. Say the map: Company equals Companies Act, Exchange equals SCRA, Regulator equals SEBI Act.
  2. Match the question's key noun to one line.
  3. Eliminate options that name a different Act or body.
  4. If the question asks about SEBI's aim, pick protect investors, develop the market, regulate the market.
  5. If it asks about appeal against SEBI, pick SAT.

Common mistakes in Securities Laws: SCRA, SEBI Act and Companies Act

  • Saying SCRA created SEBI.

    Both Acts deal with securities and the names sound alike.

    Fix: SEBI was given statutory status by the SEBI Act, 1992. SCRA, 1956 is much older and deals with exchanges and contracts.

  • Thinking SEBI's role includes guaranteeing returns or fixing prices.

    Students read 'protect investors' as protection from losses.

    Fix: Protection means fair practices, disclosure and redress. Market risk stays with the investor.

  • Assigning company incorporation or director rules to the SEBI Act.

    SEBI regulates listed companies, so students assume it governs all company law.

    Fix: Incorporation, share capital and board rules sit in the Companies Act. SEBI deals with their conduct in the securities market.

  • Naming a court as the first appeal against a SEBI order.

    Students default to 'High Court' from general law.

    Fix: The first appeal is to the Securities Appellate Tribunal.

  • Treating all three Acts as interchangeable in 'which Act' questions.

    Notes are read as one block of securities law.

    Fix: Learn the one-line map and tie each Act to a single main function before reading details.

Worked examples

Example 1

Which of the following is a purpose stated for SEBI under the SEBI Act, 1992?
A. Guaranteeing minimum returns to investors
B. Protecting the interests of investors in securities
C. Incorporating companies
D. Recognising stock exchanges

Show the solution
  1. The SEBI Act sets three purposes: protect investors, promote development of the market, and regulate the market.
  2. Option A is wrong. No law guarantees returns, and market risk stays with investors.
  3. Option C is wrong. Incorporation is under the Companies Act.
  4. Option D is wrong. Recognition of stock exchanges is under SCRA.
  5. Option B matches the first purpose.

Answer: B. Protecting the interests of investors in securities.

Example 2

An aggrieved person wants to challenge an order passed by SEBI. Where does the first appeal normally lie?
A. Securities Appellate Tribunal
B. Stock exchange board
C. Registrar of Companies
D. AMFI

Show the solution
  1. Identify the subject: an appeal against a SEBI order.
  2. Recall the route: SEBI order goes to the Securities Appellate Tribunal.
  3. A stock exchange board is not an appellate body over SEBI.
  4. The Registrar of Companies handles company filings under the Companies Act.
  5. AMFI is an industry body for mutual funds, not a tribunal.

Answer: A. Securities Appellate Tribunal.

Exam tips

  • Memorise the one-line map of the three Acts. Most questions test which Act covers which area.
  • Learn SEBI's three purposes word for word in simple form: protect, develop, regulate.
  • Distrust options that promise returns, price fixing or guaranteed outcomes.
  • Expect questions linking the SEBI Act to registration of intermediaries and research analysts. NISM XV has negative marking of 25%, so skip only if two options remain equally likely and you have no basis to choose.
  • Do not quote section numbers unless you are sure. Exams usually test the purpose, not the number.

Practice questions from Legal and Regulatory Environment (NISM XV)

Securities Laws: SCRA, SEBI Act and Companies Act in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Securities Laws: SCRA, SEBI Act and Companies Act: frequently asked questions

What are the main powers and functions of SEBI under the SEBI Act, 1992?

SEBI protects investors, promotes the development of the securities market and regulates it. It registers and regulates intermediaries, prohibits fraud and insider trading, and can conduct inquiries and impose penalties. It also makes regulations and issues directions.

What is the SCRA, 1956 mainly about?

It regulates stock exchanges and contracts in securities. It provides for recognition of stock exchanges and for listing of securities. Think of it as the trading-side law.

How does the Companies Act, 2013 matter for a research analyst?

It governs how companies are formed, raise capital, are governed and audited. Analysts read disclosures that come from these requirements. Board, audit and related-party rules affect how you judge company quality.

Where do you appeal against a SEBI order?

The first appeal lies to the Securities Appellate Tribunal. A further appeal on a question of law can go to the Supreme Court.