CHAPTER III
 
POWERS AND FUNCTIONS OF THE BOARD
 

Functions of the Board

11. (1) Subject to the provisions of this Act, it shall be the function of the Board to protect the interests of the investors in securities and to promote orderly development of, and to regulate the securities market by such measures as it thinks fit.

 

(2) Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for -

(a) regulating the business and activities in and of stock exchanges and any other securities markets;

(b) registering and regulating the business and activities of a Clearing Corporation on such terms and conditions, as the Board deems fit;

(c) registering and regulating the activities of foreign institutional investors, qualified institutional investors and such other investors as may be specified.

(d) regulating the issuance of securities and matters relating thereto including as to standards and forms and regularity or periodicity of disclosure and such other matters which require compliance by the issuer.

(e) registering and regulating the working of venture capital funds, collective investment schemes, mutual funds and schemes of the Unit Trust of India;

(f) promoting, registering and regulating self-regulatory organisations;

(g) calling for information from any person or agency in respect of any matter relating to or having a bearing on the securities market;

(h) promoting investors' education and training of intermediaries of securities markets;

(i) prohibiting fraudulent and unfair trade practices relating to securities markets;

(j) prohibiting insider trading in securities;

(k) regulating the substantial acquisition of shares and take-over of companies;

(l) undertaking inspection, conducting inquiries and audits of the stock exchanges, mutual funds, the Unit Trust of India in respect of its mutual fund activities, other persons associated with the securities market, intermediaries and self-regulatory organisations in the securities market;

(m) levying fees or other charges for carrying out the purposes of this Act;
    1. (n) conducting research for the above purposes;
    2. (o) organising seminars, lectures, training programmes for investor education and publishing relevant literature to the extent feasible.
(p) calling for particulars or information from an intermediary or Clearing Corporation as self-regulatory organisation including stock exchange from time to time, including periodical statements or returns, as may be considered necessary for its regulation in the interest of the trade;

(q) performing such other functions as may be prescribed from time to time;

(r) performing such functions and exercising such powers, as may be delegated to it under any Act, by the Central Government or as may be specified in any regulation;

(s) providing assistance to other authorities, whether domestic or foreign, assisting its foreign counterparts through arrangements for sharing information or otherwise having regard to the protection of the investors in securities and promotion, development and regulation of the securities market and the maintenance of international relations.

 Power to issue directions 12. (1) The Board may issue such general directions to any person including the persons referred to in sub-rule (2) as it deems fit, after making such enquiry, if any, as it may deem appropriate:-
      1. in the interests of the investors, or the orderly development of the securities market; or
      2. to prevent the affairs of any intermediary, self regulating organisation or other persons referred to in section 17 being conducted in a manner detrimental to the interests of investors or securities market; or
      3. to secure the proper management of any such intermediary, self regulatory organisation or person or
      4. in the public interest; or
      5. for the purpose of ensuring effective enforcement of the Act, Rules and Regulations.
(2) After making or causing to make such enquiry as the Board may deem fit for the purpose aforesaid, the Board may issue special directions:- (a) to any intermediary or self regulatory organisation;
    1. to any issuer;
    2. to any investor;
(3) The Board or its authorised officers may pass orders or issue specific directions to any intermediary or any other concerned person to make payment of any amount to the aggrieved investor or any other person adversely affected or direct deposit or retention of specific amount together with interest at such rate not exceeding bank rate as defined in Reserve Bank of India Act,1934 and may also issue directions to the stock exchange and other self-regulatory organisations for retention of an amount in their hands subject to further orders of the Board, after giving reasonable opportunity of being heard to the parties concerned and after passing a speaking order in this behalf, for effective enforcement of the provisions of the Act to prevent or check undesirable practices and to protect the interests of investors generally and also for maintaining the integrity of the securities market.

Provided that before passing of an order or issuing directions under this sub-section, the Board shall follow such other principles of natural justice as well as are applicable having regard to the facts and circumstances of the case.

Provided further that the Board or its authorised officers may fix a date not later than 30 days from the date of order or direction from which date the order or direction shall become enforceable as in the manner prescribed by law for the recovery of arrears of land revenue.

(4) The Board or its authorised officers may pass an interim or ad- interim order as it deems fit having regard to the urgency of the situation in order to protect the interests of investors and for other purposes as aforesaid and grant a post-decisional hearing to the parties affected.

 Power of Discovery, Summoning and Inspection as a Civil Court 13. (1) Notwithstanding anything contained in any other law for the time being in force, all authorised officers of the Board, shall have the same powers, as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit, in respect of the following matters, namely:- (a) the discovery and production of books of account and other documents, at such place and such time, as may be specified by such authorised officer;

(b) summoning and enforcing the attendance of persons including an officer of bank or a Public Servant or a Government Servant or an employee of Municipal Corporation or Municipal Council or any other local authority or body for purposes of the Act, along with direction to produce relevant records and documents and to record their statements on oath;

(c) inspection of any books, registers and other documents of any person referred to in section 17, at any place.

 (2) Any authorised officer may, seize and retain in his custody the books of accounts or records and other documents produced before him, for a period of six months from the date of seizure, if he has reason to believe that any of those would be useful for, or relevant to any investigation or proceeding under this Act. Explanation - For the purpose of Section 12, 15 and sub-sections (1) & (2) hereinabove, an authorised officer shall mean an officer not below the rank of Division Chief of the Board and for inspection of any books, registers and other documents referred to in clause (iii) of subsection (1), shall include an authorised investigation officer or other officer accountable to an Executive Director of the Board.

Board may establish committee

14. (1) The Board may establish such Committee(s), as it considers necessary or expedient, to advise or assist it in the performance of its functions under this Act.

(2) The Board may appoint any person to be a member of any committee established under sub-section (1), from amongst persons as specified in sub-section (5) of Section 4.

(3) A committee established under this section shall have a chairman to be appointed by the Board and may regulate its own procedure and, in the exercise of its powers under this sub-section, committee shall be subject to and shall act in accordance with any directions given by the Board.

(4) Meetings of a committee established under this section shall be held at such times and places as the chairman of the committee may, subject to sub-section (3), determine.

(5) The above-referred provisions shall apply, mutatis mutandis, also to any Panel set up by the Board under the provisions of this Act or in relation to any regulations.

 Power to restrict professionals practising in the Securities Market 15. Notwithstanding anything contained in any other law, the Board or any of its authorised officers under the Act, may hold an enquiry if it has reason to believe that the advocate or the Chartered Accountant concerned has certified statements or documents filed before it which are false or misleading or has not exercised due care before certifying such documents or has indulged in any unethical practice and if the Board or any of its authorised officer finds that the advocate or the Chartered Accountant concerned in fact made false or misleading statements or has certified accounts or documents without due care or is guilty of unethical practices, the Board or its authorised officers may make reference to the disciplinary authority constituted under the Advocates Act, 1961 or the Chartered Accountants Act,1949 ( 38 of 1949 ) for taking the necessary disciplinary action including expulsion of such advocate or a chartered accountant from practice and pending such enquiries, may not accept such documents certified or filed by such advocate or a chartered accountant or allow him to appear before the Board or other authorities constituted under the Act and before taking any action under this provision, the Board shall follow applicable principles of natural justice and give reasonable opportunity to the professional concerned of being heard.’’ Prohibition of certain acts
  1. Notwithstanding anything contained in any law for the time being in force, no person shall ;
  1. (a) deal in securities on the basis of unpublished price sensitive information or indulge in insider trading;
  1. deal in securities in fraudulent manner or indulge in fraudulent and unfair trade practices relating to securities;
  2. acquire substantial shares or takeover any company except in the manner prescribed under the Regulations;
  3. issue or offer for sale any securities except in the manner prescribed under the Act, Regulations or Guidelines; and,
  4. enter into contract in securities, deal in securities or perform the contract in securities except in the manner prescribed under the Act, Regulations or bye-laws of the Stock Exchange.
2) Contravene any provisions of the Act or Rules or Regulations made thereunder.
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