THE DRAFT SECURITIES BILL, 1998

 

(Bill No. ______ of 1998)

 

An Act to provide for the establishment of a Board to protect the interests of investors in securities, to promote the development of, and regulating the business of dealing therein, by providing for certain other matters connected therewith or incidental thereto.

Be it enacted by the Parliament in Forty-Eighth Year of the Republic of India as follows.-

CHAPTER I
PRELIMINARY
 

Short title, extent and commencement

1. (1) This Act may be called the Securities Act, 1998.

(2) It extends to the whole of India.

(3) This Act applies also to all citizens of India, outside India and branches and agencies outside of Indian Companies or bodies corporate registered or incorporated in India or outside India, in respect of transactions, contracts, and dealings, directly or indirectly relating to Indian securities.

(4) This Act shall come into force from such date as the Central Government may by notification in the Official Gazette appoint in this behalf, and different dates.

 Definitions :

2(1) In this Act, unless the context otherwise requires, -

(a) "Board" means the Securities and Exchange Board of India established under Section 3;

(b) "Board member" means a member of the Board and includes the Chairman;

(c) "Chairman" means the Chairman of the Board;

(d) "Clearing Corporation" means an entity to whom the functions of a clearing house have been entrusted by a stock exchange;

(e) "Companies Act" means the Companies Act, 1956 (1 of 1956) and shall include any amendment and statutory re-enactment thereof from time to time.

(f) "contract" means a contract for or relating to the purchase or sale of securities;
    1. "Depositories Act" shall mean the Depositories Act, 1996 (22 of 1996);
    2. " derivatives " includes a contract which derives its value from the prices of or index of prices of underlying securities, the settlement of which shall be carried out in such manner as may be specified.
    1. Securities and Exchange Board" means the Securities and Exchange Board of India constituted under the Resolution of the Government of India in the Department of Economic Affairs No. 1(44)SE/86, dated the 12th day of April, 1998 and since established under Section 3 of the Securities and Exchange Board of India Act, 1992;
    2. " Fraudulent and Unfair Trade Practices" include such practices in relation to securities as are already specified or as may be specified by Regulations made or which may be made by the Board in this behalf.
(k) "fund" means the fund constituted under Section 100;

(l) "government security" means a security created and issued, whether before or after the commencement of this Act, by the Central Government or the State Government for the purpose of raising a public loan and having one of the forms specified in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);

 (m) "insider trading" shall include such activities or practices in relation to securities as are already specified by Regulations or as may be specified by the Regulations which may be made by the Board in this behalf;
    1. "intermediary" includes stock brokers, sub-brokers, share transfer agents, bankers to an issue, debenture trustees, registrars to an issue, merchant bankers, underwriters, portfolios managers, investment advisors, depositories, participants, custodian of securities, foreign institutional investors, credit rating agencies, mutual funds, collective investment schemes and such other persons who deal in or provide services in the securities market as may be specified by the Board;
(o)"issuer" includes every person who issues or proposes to issue any security and any person in control or management of such issue;

(p) "mutual fund" means and includes Unit Trust of India or any other fund established in the form of a trust or in any other form as may be prescribed in this behalf to raise monies through the sale of units to the public or a section of the public under one or more schemes pertaining for investments in securities or money market instruments by whatever name called;

(q)"notification" means a notification published in the official gazette;
                  1. ®"offer document" shall include any document through which securities are issued or offered for subscription or purchase whether generally or by way of private placement and shall include any prospectus, memorandum, circular, form or any other document of a similar nature and shall include any offer document as may be issued in electronic form;
(s)"option in securities" means a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji-mandi, a galli, a put, a call or a put and call in securities;

(t)"participant" means a person registered as such under regulations made under this Act;

(u)"prescribed" means prescribed by rules, or regulations made by the Central Government or the Board respectively under this Act;

(v)"private placement" means an issue of securities by an issuer to a restricted number of offerees not exceeding the maximum number specified by the Board, complying also with such other conditions as may be specified including in respect of maximum value thereof at one time or during the specified period, and is not calculated to result directly or indirectly in such securities being available for subscription or purchase by persons other than those receiving the offer or invitation.

(w)"qualified institutional investors" mean investors specified under regulations and shall be qualified for certain purposes under this Act having regard to the quantum of its asset networth, qualifications and expertise in dealing in securities and such other conditions as may be specified by the Regulations;

(x)"recognised stock exchange" means a stock exchange which is for the time being recognised by the Board under section 20;

(y)"regulations" means the regulations made by the Board under this Act;

(z)"rules" means the rules made by the Government under section 111;

(aa) "stock exchange rules" with reference to the rules relating in general to the constitution and management of a stock exchange, includes, in the case of a stock exchange which is an incorporated association, its memorandum and articles of association;

(bb) "securities" include-

(i) shares, scrips, stocks, bonds, debentures, debenture stock, depository receipts or other marketable securities of a like nature in or of an incorporated company or other body corporate or unincorporated entity or units or any other instruments (by whatever name or designation prescribed or called issued by the mutual funds or any other entity), or in general any interest in instrument commonly known as securities or in other certificate of interest or participation in right to subscribe to or purchase or acquire the securities and shall include derivatives and options in securities and hybrid securities;

(ii) government securities;

(iii) such other instruments or units or any other instruments which entitle the holder thereof to be allotted any kind of property movable or immovable for any duration or payment of money in lieu thereof, at a future date.
    1. such other instruments, rights or instruments in securities as may be declared by the Central Government to be securities by issue of a notification in this behalf; and
(v) rights or interests in aforesaid securities.

(cc) "self regulatory organisation" means a body (whether a body corporate or an unincorporated association) formed voluntarily or otherwise which regulates the carrying on of functions of investment business of any kind by its members or others, subjects them to its control and includes , an organisation of intermediaries and other persons operating in the securities market and shall include a stock exchange;

(dd) "spot delivery contract" means a contract which provides for,

(i) actual delivery of securities and the payment of a price therefor either on the date of the contract or on the next day, the actual period taken for the despatch of the securities or the remittance of money therefor through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality;

(ii) transfer of the securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities are dealt with by a depository;

(ee) "stock exchange", means and includes, any body of persons, whether incorporated or not, an association of stock exchanges promoted by recognised stock exchanges constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.

(ff) "venture capital fund" includes a fund established in the form of a company or trust or any other form as may be prescribed to raise monies through loans, donations, issue of securities or units, as the case may be, and makes or proposes to make investments in accordance with the regulations in respect thereof;

 (2) Words and expressions used in this Act but defined in the Depositories Act, or in the Companies Act, shall have the meanings respectively assigned to them in that Act.

 

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