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CS Executive · Capital Market and Securities Laws · Secondary Market in India

Kaveri Securities Ltd, a stock broker, is found after an SEBI inquiry to have conducted its affairs in a way that harms investors. SEBI wants to issue a direction under Section 11B of the SEBI Act, 1992. Which precondition must be met before SEBI issues such a direction?

SEBI must make or cause to be made an enquiry and then be satisfied that a direction is necessary, for example in the interest of investors or orderly market development. The section requires no court order, Central Government approval or minimum number of complaining investors before directions are issued.

  1. ASEBI must first obtain a court order permitting the direction
  2. BSEBI must first make or cause to be made an enquiry and be satisfied that the direction is necessaryCorrect
  3. CThe Central Government must first approve the direction in writing
  4. DA complaint must be filed by at least ten investors

Explanation

Section 11B allows directions only if, after making or causing to be made an enquiry, SEBI is satisfied that it is necessary in the interest of investors or orderly development of the securities market, or to prevent detrimental conduct or secure proper management. No court order, government approval or minimum number of complainants is required by the section.

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