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

Which of the following is a condition for SEBI to issue directions under Section 12A(1) of the Securities Contracts (Regulation) Act, 1956 to a clearing corporation?

SEBI must make or cause an inquiry and be satisfied that directions are necessary, such as to protect investors or prevent a clearing corporation's affairs being run detrimentally. The section does not require member consent, a minimum number of complaints, or Central Government approval.

  1. ASEBI must first make or cause an inquiry and be satisfied that the direction is necessary, for example to prevent affairs being conducted detrimentally to investorsCorrect
  2. BSEBI must obtain the consent of the clearing corporation's members
  3. CSEBI must wait for a complaint from at least ten investors
  4. DSEBI must obtain prior approval of the Central Government

Explanation

Section 12A(1) requires that after making or causing an inquiry, SEBI is satisfied that action is necessary in investors' interest or orderly development of the market, to prevent detrimental conduct of affairs of an exchange or clearing corporation, or to secure proper management. No member consent, minimum complaints or Central Government approval is stated.

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