SECURITIES CONTRACT ACT

Pavithra Sachin MariaVidhayaarshiniPhilip

INTRODUCTIONThe securities

contracts(regulation)Act ,1956,is an Act to present undesirable in securities by regulating the business of dealing therein by providing for certain other matters connected therewith.

It was enacted by parliament in the seventh year of the Republic of India(1956) & extends to the whole of India .

DEFINITIONS OF CERTAIN IMPORTANT TERMS In this act,ContractDerivativeGovernment securityMemberPrescribed Recognized stock exchangeRulesSecurities appellate tribunalSecuritiesStock exchange

WHAT IT DEALS WITH ?

The [SC(R)A]- Securities contracts (Regulation) Act deals with :

Stock exchanges ,through a process of recognition & continued supervision.

Contracts in securitiesListing of securities on stock exchanges.

WHY DID IT COME INTO EXISTENCE ?Stock market plays a significant role in

development of the economy.Stock market facilitates mobilization of

funds from small savings of investors & channelizes these resources into various development needs of various sectors of the economy.

Stock market also provides mechanism for trading of securities thus ensuring liquidity to the investment of investors.

Thus ,stock market facilitates transactions in securities

In order to prevent undesirable transactions in securities ,promote healthy stock market ,the securities contracts(Regulation )Act 1956 enacted by parliament vide act no2

This applying to whole of India

WHO IS RESPONSIBLE & THE HISTORY BEHIND IT ?Before 1800 ,Indian securities transactions

were loans from the East Indian company1830-Bank securities traded in BombayCompanies act of 1850-Limited liability &

Joint stock company1861 –American civil war –cotton needs ,

England approached IndiaImmense fund flow-share mania of 1860-65

End of civil war ,price of cotton fell , Black Friday ,July 1 ,1865,share mania came to a hall

But still no of brokers in Bombay increased1875-Brokers association1877-native stock & share Brokers

Association ,precursor to Bombay stock exchangeIncrease in economic activity due to first world war1918-19-Several brokers manipulated standard mill

& Madhavji mill ,red to crash ,forward trading halted .

1920’s market slump Bombay legislative council-created committee

to look into the Bombay exchange Activities , head-Sir Wilfred

Report stated frequent occurrence of self regulated in the market ,offenses & manipulations

1925-Another crash -> securities contracts control act [but no effective implementation]

1927-1937-5 serious crises on Bombay exchange

W.B.Morrison-enquiry committee was formed

Even with application of the committee’s recommendations ,It failed to stop malpractice

Another committee –headed by A.D.Gorwal(1951)

Securities contract (Regulation)act of 1956

INIDAN REGULATORY FRAMEWORK

SECURITIES ISSUANCE : REGULATORY

FRAMSECURITIES ISSUANCE: REGULATORY FRAMEWORK

DEPOSITORIES ACT

SCR ACT SEBI ACTCOMPANIE

S ACT

SEBI Rules, guidelines

Stock exchanges

Intermediaries

ISSUER

AMENDMENTSThe scr act was enacted to form a healthy

market in India.It controls the securities ,geographical areas

for trading ,licensing of stock exchanges ,constitution & governance of stock exchanges & listing agreements.

It restricts trading of securities that are not covered under its definition . There were several amendments to this act ,its introduction to further include interests of the investor.

Securities contracts (Regulation )Rules,1957

Securities contracts (Regulation)amendments rules,1996

Securities contracts (Regulation)(Appeal to securities appellate tribunal)Rules,2000

Securities contracts(regulation)amendments rules,2001

Securities contracts(regulation)amendments rules,2003

Securities law (amendment)act,2005Securities contracts

(regulation)amendments,2007Securities contracts(regulation)

(amendment)rules,2010Securities contracts(regulation)(second

amendment)rules,2010Securities contracts(Regulation)(stock

exchange & clearing corporations)regulations,2012.

THE LATEST AMENDMENT

It was made in the year 2012.securities contracts(regulation )(stock exchanges & clearing corporation)Regulations,2012[Mumbai,20thJune 2012]

IMPLICATIONS IN THE SOCIETY:

traditionally ,the stock exchanges in India were organizations formed generally on not-for profit & the trading members besides rendering various services were also owning ,controlling & managing the stock exchanges.

They were essentially not corporatized & working on mutual basis.

This type of system had its own merits & inherent limitations

however with the passage of time & events occurring at the various stock exchanges ,a thought was contemplated as why they should not be allowed to corporatized & work on demutualization basis.

The advantage of the new system is that the public interest of the private interest is regulated to the background

The primary implications is to stop malpractices.After this Act ,to a certain extent investors

started trusting the stock exchange.

There was less means of cheating & the government had control over it .

It reduced serious crises

THANK YOU