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

SEBI inquires into the working of a recognised stock exchange and is satisfied that its affairs are being conducted in a manner detrimental to the interests of investors. Under Section 12A of the Securities Contracts (Regulation) Act, 1956, what may SEBI do?

SEBI may issue appropriate directions to the stock exchange after making an inquiry and being satisfied that it is necessary. Section 12A empowers it to direct exchanges, clearing corporations and associated persons, as well as listed companies, in the interests of investors and the securities market.

  1. AIssue appropriate directions to the stock exchange, after the inquiry, in the interests of investors and the securities marketCorrect
  2. BIssue directions only to listed companies and not to the exchange itself
  3. CIssue directions without any inquiry, since the inquiry is optional
  4. DOnly recommend action to the Central Government, which alone can issue directions

Explanation

Section 12A says that if SEBI, after making or causing an inquiry, is satisfied that it is necessary to prevent affairs of an exchange or clearing corporation being conducted detrimentally to investors, it may issue directions. Directions may go to the exchange, clearing corporation, agency or person, or associated persons, and also to listed companies. Option B is wrong as exchanges are expressly covered.

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