CS – PROFESSIONAL – OPEN BOOK EXAM...LESSON –1. Economic Framework of Capital Market Constituents Of The Financial System 2 Financial Assets 2 Classification Of Financial Assets

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Topics Page No.

LESSON – 1. Economic Framework of Capital Market

Constituents Of The Financial System 2

Financial Assets 2

Classification Of Financial Assets 2

Marketable Assets 2

Non-Marketable Assets 2

Cash Assets 2

Debt Asset 2

Stock Asset 2

Financial Intermediaries 3

Capital Market Intermediaries 3

Money Market Intermediaries 3

Financial Markets 3

Classification Of Financial Market 3

Unorganized Markets 3

Organized Markets 4

Capital Market 4

Industrial Securities Market 4


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Government Securities Market 4

Long-Term Loans Market 4

Money Market 4

Features Of Money Market 5

Capital Market 5

Primary Market 6

Secondary Market 6

What Is Transaction Cost? 7

Functions Of Capital Market 8

Role Of Capital Market In Resource Allocation 9

Capital Formation 10

Stages Of Capital Formation 10

Role Of Capital Market In Capital Formation 11

Lesson 2 Legal Framework

Department of Economic Affairs (DEA) 16

Capital Market Division 17

Primary Market (PM) 17

Secondary Market (SM) 17

External Markets (EM) 17

External Commercial Borrowings (ECB) 18

National Company Law Tribunal 19

Reserve Bank of India 19

Securities and Exchange Board of India (SEBI) 19

SEBI Act, 1992: 20

Securities Contracts (Regulation) Act, 1956 20

Depositories Act, 1996 20

Companies Act, 2013 20

Grievance Redressal Mechanism 20

Grievance Redressal Mechanism At Stock Exchange 21

Investor Protection Fund 21

Grievance Redressal Mechanism at SEBI 21

Investor Protection and Education Fund 21

Securities Appellate Tribunal 22

Prevention Of Money Laundering Act, 2002 23

Objective Of PREVENTION OF MONEY LAUNDERING ACT, 2002 23

Punishment for Money-Laundering 23

Obligations of Banking Companies, Financial Institutions and Intermediaries of 23

Securities Market


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Cash Transaction Reports 25

Suspicious Transaction Reports 25

Investigating Agencies In Case Of PMLA, 2002 27

Central Bureau of Investigation 28

Financial Intelligence Unit – India (FIU-IND) 28

Functions of FIU-IND 29

The Financial Action Task Force (FATF) 29

FATF Recommendations 2016 29

Lesson 3 Framework of Market Infrastructure Institutions

Framework Of Market Infrastructure Institutions 36

Securities Contract (Regulation) (Stock Exchanges And Clearing Corporations) 36

Regulations, 2012 Recognition of Stock Exchanges and Clearing Corporations 36

Networth Requirements FOR LISTING ON STOCK EXCHANGES 36

Ownership of Stock Exchanges 37

Ownership of Clearing Corporations 37

Governance of Stock Exchanges and Clearing Corporations 38

Listing of Securities 38

Procedural Norms For Listing 38

The Depositories Act, 1996 41

Eligibility Condition For Depository Services 41

Eligible Securities Required To Be In The Depository Mode 41

Fungibility 42

Rights Of Depositories And Beneficial Owner 42

Pledge Or Hypothecation Of Securities Held In A Depository 42

Furnishing Of Information And Records By Depository And Issuer 43

Option To Opt Out In Respect Of Any Security 43

Depositories To Indemnify Loss In Certain Cases 43

Enquiry And Inspection 43

Power of SEBI 43

Power of SEBI to give directions 44

Penalty 44

Penalty for failure to furnish information/return etc. 44

Penalty for failure to enter into agreement 44

Penalty for failure to redress investors' grievances 44

Penalty for delay in dematerialisation or issue of certificate of securities 45

Penalty for failure to reconcile records 45

Penalty for failure to comply with directions issued by SEBI 45


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Penalty for contravention where no separate penalty has been provided 45

Power to adjudicate 45

Factors to be taken into account by Adjudicating Officer 45

Settlement of Administrative Civil Proceedings 46

Recovery of amounts 46

Crediting of penalties to consolidated fund of India 47

Offences 47

Offences by companies 47

Cognizance of offences by Courts 48

Composition of certain offences 48

Power to grant immunity 48

Special Court 48

Establishment of Special Courts 48

Offences triable by Special Courts 48

Appeal and Revision 48

Application of Code to proceedings before Special Court 48

Transitional provisions 49

Appeals 49

Appeal To Securities Appellate Tribunal 49

Procedure And Powers Of Securities Appellate Tribunal 50

Appeal To Supreme Court 50

Right To Legal Representation 50

Civil Court Not To Have Jurisdiction 50

Securities Contracts (Regulation) Act, 1956 50

Application For Recognition Of Stock Exchanges 51

Grant Of Recognition To Stock Exchanges 51

Withdrawal of recognition 52

Power of Central Government to call for periodical returns or direct inquiries to be 52

made Power of recognised stock exchange to make rules restricting voting rights, etc 53

Power of Central Government to direct rules to be made or to make rules 53

Clearing Corporation 54

Power of SEBI to make or amend bye-laws of recognised stock exchanges 54

Power of Central Government to supersede governing body of a recognised stock 55

exchange Power to suspend business of recognised stock exchanges 55

Lesson 4 Financial Intermediaries Framework

Primary Market Intermediaries 60


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Merchant Banker 60

Sebi (Merchant Bankers) Regulations, 1992 60

Capital Adequacy For Merchant Bankers 61

General Obligations and Responsibilities of Merchant Banker 61

Code Of Conduct For Merchant Bankers 62

Responsibilities of Lead Manager 64

Merchant Banker not to Act as such for an Associate 64

Minimum Underwriting Obligation 64

Prohibition to Acquire Shares 64

Disclosure to SEBI 64

Appointment of Compliance Officer 64

Procedure for Inspection 64

Procedure For Action Against Merchant Banker In Case Of Default 65

Registrars To An Issue And Share Transfer Agents 65

Sebi (Registrars To An Issue And Share Transfer Agents) Regulations, 1993 66

Criteria For Registration Of Share Transfer Agents 66

General Obligations And Responsibilities 67

Procedure For Inspection 67

Liability For Action In Case Of Default Of RTA 68

Underwriters 68

Sebi (Underwriters) Regulations, 1993 68

Obligations And Responsibilities Of Underwriters 68

Appointment Of Compliance Officer 68

Inspection and Disciplinary Proceedings of RTA 69

Banker To An Issue 70

Sebi (Banker To An Issue) Regulation, 1994 70

Consideration Of Application To Act As Banker To An Issue 70

Procedure For Registration Banker To An Issue 70

General Obligations And Responsibilities Banker To An Issue 70

Code Of Conduct 71

Procedure for Inspection 72

Debenture Trustees 72

Sebi (Debenture Trustees) Regulations, 1993 73

Responsibilities and Obligations of Debenture Trustees 74

Duties of Debenture Trustees 74

Maintenance of Records by Debenture Trustees 75

Appointment of Compliance Officer by Debenture Trustees 75


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Information to SEBI by Debenture Trustees 76

Secondary Market Intermediaries 76

Stock Brokers And Sub-Broker 76

Sebi (Stock Brokers & Sub-Brokers) Regulations, 1992 77

Rejection Of Application Of Brokers 77

Registration Of Sub-Brokers 78

Registration Of Trading And Clearing Members 79

Registration Procedure for Trading and Clearing Member 80

Registration of Trading and Clearing Members of Currency Derivatives Segment 80

Registration Procedure 81

General Obligations and Responsibilities 82

Procedure for Inspection of Stock Brokers’ Offices 82

Procedure for Action in Case of Default 83

Liability for Monetary Penalty 83

Liability for Action under the Enquiry Proceeding 84

Liability for Prosecution 85

CASE STUDY ON FRAUDULENT DEALINGS - 85 BishwanathMurlidharJhunjhunwala v. SEBI Certification By Practicing Company Secretary - Sebi (Debenture Trustees) Regulations, 86 1993 Internal Audit for Stock Brokers/Trading Members/ Clearing Members 86

Portfolio Manager 86

Sebi (Portfolio Managers) Regulations, 1993 86

Norms for Registration as Portfolio Managers 87

Capital Adequacy Requirement For PORTFOLIO MANAGERS 87

Renewal Of Certificate Of PORTFOLIO MANAGERS 88

Conditions Of Registration Of PORTFOLIO MANAGERS 88

Procedure Where Registration Is Not Granted For PORTFOLIO MANAGERS 89

Contract with Clients and Disclosures 89

Responsibilities of a Portfolio Manager 91

Investment of Clients Money 91

Accounting by Portfolio Managers 91

Reports by Portfolio Manager to the Client 92

Action on Auditor’s Report and Disclosure to SEBI 93

Obligations of Portfolio Manager 93

Internal Audit Of Portfolio Manager 94

Custodian Of Securities 94

Sebi (Custodian Of Securities) Regulations, 1996 94


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Application For Grant Of Certificate For CUSTODIAN OF SECURITIES 95

Application To Conform To Requirements For CUSTODIAN OF SECURITIES 95

Procedure And Grant Of Certificate For CUSTODIAN OF SECURITIES 96

Renewal Of Certificate For CUSTODIAN OF SECURITIES 97

Effect Of Refusal To Grant Certificate For CUSTODIAN OF SECURITIES 97

Prohibition Of Assignment For CUSTODIAN OF SECURITIES 98

Maintenance Of Records And Documents By CUSTODIAN OF SECURITIES 98

Obligations Of Custodian 99

Investment Adviser 100

Sebi (Investment Advisers) Regulations, 2013 100

Registration of Investment Advisers 100

Exemption from registration of Investment Advisers 100

Qualification & Certification of Investment Advisers 101

General Obligations and Responsibilities of Investment Advisers 102

Sebi (Credit Rating Agencies) Regulations, 1999 103

Registration of Credit Rating Agencies 104

Promoter of Credit Rating Agency 104

Eligibility Criteria of Credit Rating Agency 104

Application to Conform to the Requirements of Credit Rating Agency 105

Conditions of Certificate of Credit Rating Agency 105

Procedure where Certificate is not granted for Credit Rating Agency 106

Code of Conduct Code of Conduct by Credit Rating Agency 106

Agreement with the Client by Credit Rating Agency 107

Monitoring of Ratings by Credit Rating Agency 107

Internal Procedures to be Framed by Credit Rating Agency 108

Disclosure of Rating Definitions by Credit Rating Agency 108

Maintenance of Books of Accounts Records by Credit Rating Agency 108

Rating Process of Credit Rating Agency 109

Restrictions on Rating of Securities Issued by Promoter and Certain Entities, Connected 109

with A Promoter, or Rating Agency Procedure for Inspection and Investigation by SEBI of Credit Rating Agency 109

Obligations of Credit Rating Agency 110

MARKET MAKER 111

GUIDELINES FOR MARKET MAKER 111

Registration of the Market Maker 111

The Obligations and Responsibilities of Market Makers 111

Number of Shares per Market Maker 111

Price Band and Spreads 112


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Sebi (Depositories And Participants) Regulations, 1996 112

Rights And Obligations Of Depositories And Its Constituents 113

Governance Of Depository 114

Audit Under Sebi (Depositories And Participants) Regulations, 1996 114

Internal Audit Of Operations Of Depository Participants 114

CONCURRENT AUDIT By DEPOSITORY PARTICIPANTS 115

Designated Depository Participant (DDP) 116

Eligibility Criteria For DDP 116

Sebi (Research Analyst) Regulations, 2014 116

Saral Account Opening Form For Resident Individuals 125

Investor Protection Fund Of Depositories 125

Lesson 5 Primary Market

Types of Issue in Primary Market 130

Public issue 130

Initial public offer 130

Further public offer 130

Right issue 130

Bonus issue 130

Private placement 130

Preferential allotment 130

Qualified institutions placement (QIP) 130

Institutional placement programme (IPP) 130

OFFER FOR SALE (OFS) 131

OFS PROCESS 131

Difference between Offer for Sale (OFS) process and IPOs/FPOs 132

Price Band UNDER OFS 132

Sebi Guidelines On Offer For Sale (Ofs) Of Shares By Promoters Through The Stock 132

Exchange Mechanism Floor price 134

Order Placement 134

Risk Management 135

Allocation 135

Settlement 135

Handling of default in pay-in 135

Issuance of Contract Notes 135

Withdrawal of offer 136

Cancellation of offer 136

Understanding The Guideline Step Wise 136


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Different Form Of Prospectus 137

Offer Document 137

Draft Offer Documents 137

RHP (Red Herring Prospectus) 137

Shelf Prospectus 137

Filing of Offer Document 138

LEAD MANAGER 138

Pre-Issue Management 139

Post-issue Management 139

Co-ordination with Intermediaries 140

UNDERWRITING 140

Due Diligence in IPO / FPO 141

Pre-issue-Due Diligence Certificates 146

Post issue diligence 146

Basis Of Allotment 146

Book Building 147

Book Building Process Through A Flowchart 151

Additional Disclosures In Case Of Book Building 153

Procedure for Bidding 153

Alternate Method of Book Building 154

Green Shoe Option Facility 155

Green Shoe Option Process 158

Pre-Issue Activities 158

Rights Issue 160

Steps Involved In Issue Of Rights Shares 162

Bonus Issue 163

Advantages of Issuing Bonus Shares 163

SEBI Regulations Pertaining to Bonus Issue 164

Steps involved in Issue of Bonus Shares 165

Preferential Issue 166

SEBI ICDR Regulations, 2009 Pertaining to Preferential Issue 166

Relevant date 167

Upfront Payment on warrants 167

Lock-in-period 168

Allotment Pursuant to Shareholders Resolutions 168

Submission of Valuation Report 169

Qualified Institutional Buyer 170


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Conditions for making QIP 171

Intermediaries involved in QIP and their roles 171

Placement document 171

Issue of partly paid-up securities 172

Restrictions on allotment 172

Minimum numbers of allottees 173

Institutional Placement Programme 173

Conditions for Institutional Placement Programme 174

Offer DocumentUnder INSTITUTIONAL PLACEMENT PROGRAMME 174

Pricing And Allocation/Allotment Of INSTITUTIONAL PLACEMENT PROGRAMME 174

RestrictionsOf INSTITUTIONAL PLACEMENT PROGRAMME 175

Restrictions On Size Of The Offer 175

Listing Agreement 175

Benefits Of Listing 176

Laws Governing Listing 176

Event Based And Time Based Compliance Under Listing Agreement 176

Event Based Compliances 176

Time Based Compliances 179

Listing On Institutional Trading Platform 181

Listing Pursuant To Public Issue 183

Exit of entities listed without making a public issue 184

LISTING OF SECURITIES ON STOCK EXCHANGES 184

Obligation Of Stock Exchange 185

OFFER FOR SALE (OFS) PROCESS 185

Lesson 6 Secondary Market

Corporate Actions 190

From Listing Agreement To Listing Regulations, 2015: A Birds’ Eye View 190

Listing Agreement: Meaning 191

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015: An 191

Introduction SEBI (LODR) Regulation, 2015: Basic Features 192

Differences between Listing Regulation and Listing Agreement 192

SEBI (LISTING OF OBLIGATION AND DISCLOSURE REQUIREMENT) 193 REGULATION, 2015

Objectives of LODR 193

Applicability OF LODR 194

Key Features OF LODR 194

Major Transformation FROM LISTING AGREEMENT TO LODR 195


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Material Disclosures 195

Deemed material 195

Materiality thresholds 195

Board composition and its committees UNDER LODR 196

Duties of the board 196

Related Party Transactions 197

Scope of RPTs 197

Approval of RPT 197

Corporate governance for listed start-ups 197

Common Obligations of Listed Entities – Chapter III of Listing Regulations 198

Obligations of listed entity which has listed its specified securities i.e. Equity shares 198

and convertible securities – Chapter IV of Listing Regulations Obligations of Listed Entity Which Has Listed Its Non-Convertible Debt Securities 201 (NCD’s) Or Non-Convertible Redeemable Preference Shares (‘NCPS’) Or Both – Chapter V of Listing Regulations Quarterly / Half Yearly / Annual Compliances under SEBI (LODR) Regulation 2015 203

Compliance Certificate certifying maintaining physical & electronic transfer facility - 203

Within one month of end of each half of the financial year Regulation 13 (3) - Statement of Investor complaints - Within Twenty one days from 203 the end of each quarter Regulation 27 (2) - Corporate Governance - Within 15 days from quarter end. 203

Regulation 31 - Shareholding Pattern - Within 21 days from quarter end 203

Regulation 33 - Financial Results - Within 45 days from quarter end 203

Regulation 33 - Financial Results - Within 45 days from quarter end 203

Regulation 34 –Annual Report - Within twenty one working days of it being approved 204

and adopted in the annual general meeting. Regulation 40 (9) – Certificate from Practicing Company Secretary -Within one month 204

of the end of each half of the financial year Reconciliation of Share Capital Audit - (SEBI- DP Reg.55A) - Within 30 days from 204

quarter end. Other Compliance Requirements under SEBI Listing Regulations 2015. 204

Regulation 7 – Appointment of New Share Transfer Agent. 204

Regulation 14 – Listing Fees & Other charges. 205

Regulation 29 – Notice for Board Meeting to consider the prescribed matters 205

Regulation 30 – Disclosure of Price-Sensitive Information 205

. Regulation 30 – Outcome of Board Meeting 205

Regulation 42 – Notice for Record Date \ Corporate Action 205

Regulation 43 – Declaration of Dividend 205

Regulation 43 A – Dividend Distribution Policy 205

Regulation 44 – Voting Result 206


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Regulation 46 - Company Website 206

Regulation 30(1) and 30(2) - SEBI Takeover Regulations 2011 206

Regulation 7(2) - SEBI (Prohibition of Insider Trading) Regulations, 2015 206

Compliance Calendar under SEBI (LODR), Regulation 2015 207

Corporate Governance 213

Regulatory Framework Of Corporate Governance In India 213

Corporate Governance and SEBI (Listing of Obligation and Disclosure Requirements) 213

Regulation, 2015 Time of Reforms in Indian Capital Market in line towards better Corporate Governance 214

Key Features of Corporate Governance under SEBI (LODR) Regulation, 2015 214

SEBI’s Standard on Corporate Governance 215

Regulation 23 - Related Party Transactions 215

Regulation 25: Independent Director 216

Audit Committee 216

Regulation 27 Compliance report on Corporate Governance 216

Corporate Governance under SEBI (LODR) Regulation, 2015 216

Corporate Governance Under Companies Act, 2013 224

Stock Exchange Mechanism 231

Arbitration Mechanism at Stock exchanges 231

Maintenance of a Panel of Arbitrators 231

Code of Conduct for Arbitrators 232

Appellate Arbitration 233

Arbitration Fees 233

Place of Arbitration 234

Implementation of Arbitral Award in favour of Clients 234

Record and Disclosures 235

MARGINING 235

Initial Margin 236

Maintenance Margin 236

Types Of Margins In Cash And Derivative Segment 237

Value at Risk (VaR) margin 237

Extreme Loss Margin 237

Mark-to-Market (MTM) margin 237

Derivatives Segment 238

Initial Margin 238

Exposure Margin 238

Premium Margin 238

TRADING OF SECURITIES 239


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Order Placing 239

Order Execution 239

Contract Note Preparation 239

Delivery and Clearing 239

Share Transfer 239

Settlement System 240

Accounting period settlement systems 240

Rolling Settlement 240

Clearing And Settlement 240

Clearing Corporation 240

Clearing Members(CM) 240

Custodians 240

Clearing Banks 240

Depositories 241

Clearing & Settlement Process 241

Trade Guarantee Fund 242

Trading Software 242

Stock Market Indices 242

Types Of Indices 243

BSE Indices 243

NSE Indices 243

BSE INDICES 243

SENSEX - Scrip Selection Criteria 244

S & P BSE SENSEX Calculation Methodology 245

Definition of Free-float 245

Major Advantages of Free-float Methodology 246

Determining Free-float Factors of Companies 247

Index Closure Algorithm 248

Maintenance of BSE Indices 248

On - Line Computation of the Index 248

Adjustment for Bonus, Rights and Newly Issued Capital 249

Adjustments for Rights Issues 249

Adjustments for Bonus Issue 249

Base Market capitalization Adjustment 249

CNX NIFTY 249

Selection Criteria for CNX Nifty 250

Price Index Calculations Formula 250


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Investible Weight Factors (Iwfs) 250

Lesson 7 Capital Market Investment Institutions

National Level Institutions 256

Industrial Development Bank of India (IDBI) 256

Industrial Finance Corporation of India (IFCI) 256

Industrial Investment Bank of India Ltd (IIBI) 257

Specialised Financial Institutions (SFIs) 257

IFCI Venture Capital Funds Ltd (IVCF) 257

ICICI Venture Funds Ltd 257

Tourism Finance Corporation of India Ltd. (TFCI) 257

Life Insurance Corporation of India (LIC) 257

Unit Trust of India (UTI) 257

General Insurance Corporation of India (GIC) 257

State Financial Corporations (SFCs) 258

– State Industrial Development Corporations (SIDCs) 258

Qualified Institutional Buyers 258

Anchor Investor 259

PRIVATE EQUITY 260

Types of Private Equity 260

Leveraged Buyout (LBO) 260

Venture Capital 260

Areas of Investment 261

Stages Of Investment Financing 261

Early Stage Financing 261

Later Stage Financing 262

Angel Fund 262

SEBI – Recent move in 2016 on Angel Investor 263

Types Of Angel Investors 263

Core Angels 263

High-tech Angels 264

Return On investment (ROI) Angels 264

Enthusiast Angels 264

Micromanagement Angels 264

Professional Angels 264

Pension Fund 264

Formal Sector Pensions 264

Pension Fund Management 265


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Foreign Portfolio Investor 265

Investment Conditions and Restrictions FPI 266

Mutual Fund 266

How a Mutual Fund is Set Up 267

Types of Mutual Fund Schemes 267

Structure Based Classification 268

Return based classification 268

Investment based classification 268

Fixed Maturity Plans 269

Exchange Traded Funds (ETFs) 270

Capital Protection Oriented Schemes 270

Gold Exchange Traded Funds (GETFs) 270

Quantitative Funds 270

Funds Investing Abroad 270

Fund of Funds (FOFs) 270

Alternative Investment Funds 270

Types of AIFs 271

Where an AIF can Invest 272

Category wise Investment Condition 272

Conditions for Category II AIFs 273

Conditions for Category III AIFs 273

Hedge Funds 273

How Hedge Funds Work 273

A Taxonomy of Hedge Fund Strategies 274

A Taxonomy of Hedge Fund Strategies 274

Lesson 8 Capital Market Instruments

Characteristics Of Equity Shares 278

Shares With Differential Voting Rights 279

Prohibition Of Superor Rights - Clause 28a 280

Anand Jaiswal v. Jagatjit Industries Limited - Case Law 280

Preference Shares 281

Cumulative Preference Shares 282

Non-Cumulative Preference Shares 282

Convertible Preference Shares 282

Redeemable Preference Shares 283

Participating Preference Shares 283

Fully Convertible Cumulative Preference Share (EQUIPREF) 283


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Debentures 283

Features of Debentures 283

Types of Debentures 284

Naked or unsecured debentures 284

Secured debentures 284

Redeemable debentures 284

Perpetual debentures 284

Bearer debentures 284

Registered debentures 284

Classification of Debentures based upon Convertibility 284

Basic Features of Convertible Debentures 284

Advantages of Convertible Debentures 285

Fully Convertible Debentures With Interest (Optional) 286

Non Convertible Debentures With Put And Call Option 286

Put Options in NCD 286

Call Option in NCD 286

BONDS 286

Characteristics of a Bond 286

Types of Bond 287

Types of Bond 287

Corporate Bonds 287

Banks and other financial institutions bonds 287

Warrant 287

Sweat Equity Shares 287

Secured Premium Notes (SPN) 288

Equity Shares With Detachable Warrants 288

Foreign Currency Convertible Bonds (FCCBS) 289

Foreign Currency Exchangeable Bonds (FCEBS) 289

American Depository Receipts 290

Global Depository Receipts 290

Difference between American Depository Receipts (ADR) and Global Depository 290

Receipts (GDR) Indian Depository Receipts (Idrs) 291

Benefits of IDRs 291

Derivatives 291

Future 291

Options 291

Index Futures & Options 292


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Currency Futures 293

Interest Rate Futures 293

Stock Futures And Stock Options 294

Pricing of Stock Futures 294

Exchange Traded Funds (ETFS)Change Traded Funds (ETFS) 295

Lesson 9 Resource Mobilization Through International Markets

American Depository Receipt 298

Types of ADRs 299

Unsponsored ADR 299

Sponsored ADR 299

Global Depository Receipts 299

Advantage Of Adrs And Gdrs 300

Process involved in Issue of ADR/GDR 301

Two-Way Fungibility Scheme 302

One way fungibility 302

Two way fungibility 302

Issuance Of Shares Under Adr/Gdr 302

Provisions of Companies Act, 2013 relating to issue of GDR 304

Companies (Issue of Global Depository Receipts) Rules, 2014 305

Conditions for issue of depository receipts 305

Manner and form of depository receipts 305

Voting rights 305

Voting rights 306

Non applicability of certain provisions of the Act 306

Statutory Approvals Required for issue of GDR/ADR 306

Approval of the Foreign Investment Promotion Board (FIPB) 306

Agencies involved in ADR/GDR issue 307

Agreements and related Documents 308

Custodian Agreement 309

Escrow Agreement 309

Procedural Requirements 310

Roadshows 311

Stepwise Procedure For Issue Of Adr/Gdr 312

Reporting Of Adr/Gdr Issues 313

Fccb And Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 314

Transfer and redemption 314

Listing Of GDR 314


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London Stock Exchange 314

Different ways in which a company can list in London 315

Listing On The Main Market 315

FSA’s requirements for a company to receive listed status 315

Listing On The Main Market In London 315

Listing On Professional Security Market 318

Requirement of prospectus 318

Key eligibility criteria OF LONDON STOCK EXCHANGE 318

Listing On AIM Of London Stock Exchange 319

Luxembourg Stock Exchange 320

Listing Of Adr 320

Nasdaq 321

The Nasdaq Global Select Market (NGSM) 321

The Nasdaq Capital Market (NCM) 323

The Nasdaq Global Market (NGM) 325

Newyork Stock Exchange (NYSE) 327

NYSE Quantitative Listing and Maintenance Standards 327

Resource Mobilisation In International Capital Market 331

External Commercial Borrowings (Ecb) 331

Depository Receipts Scheme, 2014 342

Lesson 10 Economics Of Commodities Marketing

Types Of Commodities 346

Commodity Markets 346

Marketing Of Agricultural Commodities 347

STORAGE 349

Bag storage 349

Bag storage 350

Warehousing 350

Importance of warehousing 350

Working of Warehouses 350

Private warehouses 351

Public warehouses 351

Bonded warehouses 351

Central Warehousing Corporation (CWC) 351

State Warehousing Corporations (SWCs) 352

Variance In Commodity Market 352

Weather Derivatives 353


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Freight Derivatives 353

Electricity Derivates 354

Catastrophe Derivatives 355

Carbon Derivatives 355

Hedging 356

Hedging Risks 356

Understanding Basis Risk 357

Lesson 11 Commodities Market Operations

Role Of Commodity Exchanges 362

Evolution Of Commodity Exchanges 362

Origin Of Commodity Market In India 362

Forward Contracts (Regulation) Act, 1952 363

Three-Tier Regulatory System 364

Forward Market Commission Of India 364

Functions of Forward Market Commission of India 364

Powers of Forward Market Commission 365

Commodity Exchanges In India 365

Hedgers 366

Speculator 367

Difference between a speculator and gambler 368

Arbitrageurs 368

Commodity Producers/Consumers 368

Commodity Processors 368

Commodity Traders 369

Financial Institution/Dealers 369

Trading In Commodity Market 369

Margin money 369

Different types of margins payable on futures 370

Mark-to-Market (MTM or M2M) 370

Maintenance margin 370

Order Types 370

Electronic Spot Exchanges 371

Exchange Membership 372

Clearing 372

Clearing Mechanism 373

Clearing Banks 373

Settlement Mechanism 374


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Final settlement 375

Settlement Methods 375

Compulsory Delivery Contract 376

Sellers Right Contract 376

Intention Matching Contract 377

Cash settlement 377

Accredited Warehouse 377

Approved Registrar and Transfer agents (R&T agents) 378

Approved assayer 378

Forward Contract 378

Futures 379

Distinction between Futures and Forward Contracts 380

Options 381

In-the-money option 381

Out-of-the-money option 382

Intrinsic value of an option 382

Hedging 382

Short Hedge 383

Long Hedge 383

Advantages of Hedging 384

Speculation 384

Arbitrage 386

Overpriced Commodity Futures: Buy Spot, Sell Futures 386

Underpriced Commodity Futures: Buy Futures, Sell Spot 386

Lesson 12 Money Market

Features Of Money Market 390

Money Market Vs. Capital Market 391

Growth Of Money Market 391

Structure And Institutional Development 392

Money Market Instruments 393

Gilt-Edged (Government) Securities 393

Call Money And Notice Money 393

Term Money 394

Bill Discounting 394

Procedure of Bill Discounting 395

Discount Rates 395

BILL REDISCOUNTING SCHEME (BRD) 396


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Repurchase Agreements 396

Banker’s Acceptance 397

Treasury Bills 397

Benefits of Investing in Treasury Bills 399

Features of Treasury Bills 399

Primary Market 400

Secondary Market 400

Types of Auction 400

Certificates Of Deposits 401

Issue of Duplicate Certificates 402

Inter-Corporate Deposits 403

Commercial Bills 403

Commercial Paper 403

Procedure For Issuance 405

Money Market Mutual Funds (MMFS) 406

Factoring 406

Factoring Process 406

Advantages for the Seller 408

Types Of Factoring 409

Letter Of Credit 410

Basic Forms Of Lcs 410

Revocable Letter of Credit 411

Irrevocable Letter of Credit 411

Working Mechanism 411

Bill Of Exchange 413

FIMMDA - The Fixed Income Money Market and Derivatives Association of India 414

FOREIGN EXCHANGE DEALER'S ASSOCIATION OF INDIA 414

Lesson 13 Insider Trading

SEBI (Prohibition of Insider Trading) Regulations, 2015 419

Provisions Relating To Insider Trading In Companies Act, 2013 419

The Sebi (Prohibition Of Insider Trading) Regulations 2015 420

Applicability Of The Regulations 421

DEFINITIONSCompliance officer AS PER SEBI (PROHIBITION OF INSIDER 421

TRADING) REGULATIONS 2015 Connected Person AS PER SEBI (PROHIBITION OF INSIDER TRADING) 422

REGULATIONS 2015 “Insider” AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 423 2015


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“Trading” AS PER SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS 423

2015 “Unpublished Price Sensitive Information” 424

What is Trading window? 425

What is a pre-clearance? 425

What is a contra trade? 425

What is a Trading Plan? 425

Restriction On Communication And Trading By Insiders 425

Trading when in possession of Unpublished Price Sensitive Information 426

Trading Plans 427

Disclosure Of Trading By Insiders 428

Initial Disclosure 428

Continuous Disclosure 428

Code for Fair Disclosure 429

Code of Conduct UNDER AS PER SEBI (PROHIBITION OF INSIDER TRADING) 429

REGULATIONS 2015 Designation of Compliance Officer UNDER AS PER SEBI (PROHIBITION OF 430

INSIDER TRADING) REGULATIONS 2015 PENALTIES FOR CONTRAVENTION UNDER AS PER SEBI (PROHIBITION OF 431

INSIDER TRADING) REGULATIONS 2015

Lesson 14 Substantial Acquisition of Shares and Takeovers

DEFINITIONS: Control 443

Enterprise Value 443

Manager to Open Offer 444

Offer Period 444

Persons Acting in Concert 444

"Volume weighted average market price" 445

"Volume weighted average price" 445

Substantial Acquisition Of Shares Or Voting Rights 446

Obligation to Make Open Offer 446

Trigger Point For Making An Open Offer By An Acquirer 447

25% Shares or Voting Rights 447

Creeping Acquisition Limit 447

Open Offer Under Sebi Takeover Regulations, 2011 447

Mandatory Open Offer 448

Voluntary Open Offer 448

Conditional Offer 449

Delisting Offer 449

Competing Offer 450


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Restrictions on Wilful Defaulter 450

OPEN OFFER PROCESS 450

Withdrawal of Open Offer 453

PUBLIC ANNOUNCEMENT 454

Submission of Public Announcement (PA) 454

Publication and Submission of Detailed Public Statement 454

Contents of Public Announcement and Detailed Public Statement 455

Procedure of Filing PA and DPS 456

Offer Price 456

Provision Of Escrow 457

Mode Of Payment Of Escrow 457

Disclosures In Sebi Takeover Regulations, 2011 458

EXEMPTIONS Regulation 10 of the SEBI Takeover Regulations, 2011 459

Regulation 10 - Automatic Exemptions 460

Regulation 11 – Exemption By Sebi 463

Procedure for filing the application under Regulation 11 464

Report Of Justice Dhanuka Committee On Securities Laws 483