2.2 - Several new definitions including that of "derivatives" "fraudulent and unfair trade practices", "insider trading", "intermediaries", "issuer", "mutual fund", "offer documents", "private placement", "qualified institutional investors", "self regulatory organsiations" and "venture capital funds" have been statutorily introduced.

The insertion of definition of "qualified institutional investor" enables identification of a class of "qualified institutional investors" who may be subject to a more liberal, enabling regulation regime. This would be particularly relevant in the context of private placements.

Provision has been made for comprehensive definition of "securities". This now includes derivatives, plantation companies, time shares, securitised instruments, etc.

Some existing definitions, have also been modified to make the same more comprehensive. Insertion / modifications of these definitions will provide the basis for promoting of trading in "derivatives", statutory regulation and punishment of insider trading and fraudulent and unfair trade practices as also, regulations of private placements.

The same also includes regulation of issuer and improving disclosure standards to be followed by the issuer.

3. Powers and functions of SEBI rationalised. Provision is made for power to issue general and special directions including those for enforcement of such directions and recovery of money as arrears of land revenue.

3.1 - Scope of SEBI’s powers to issue directions, is expressly extended also to investors or any other person, rather than merely intermediaries.

4. Statutory provision is made for restriction of professionals practicing in the securities market including advocates, chartered accountants also who act as experts if they are found to be guilty of malpractices. This is without prejudice to the Advocates Act as the autonomy of the bar and the Chartered Accountant Act is maintained and is in furtherance of the strong desire of the Committee to encourage raising of professional standards and creation of a larger force of securities market professionals.

5. A new Chapter for recognition and regulations of self regulatory organisations is inserted. The encouragement of self regulatory organisations and the statutory regulation thereof are the key recommendations of this Committee.

5.1 - The right to carry on business as intermediary has been linked to membership of an SRO.

6. The scope of recognition and regulation of stock exchange, also a form of SRO has now been rationalised.

6.1 - The definition of stock exchange has been extended to include "exchanges promoted by other exchanges."

6.2 - Concept of "territoriality" with reference to recognition of exchanges has been abandoned. SEBI’s approval for additional trading floors will still be required.

6.3- In case of supersession of the governing board, some members may continue till reconstitution of new governing body.

7. Strict provisions made for the regulation of the issuer, particularly, in relation to issue of securities and disclosure standards.

8. Consequential provisions are prescribed for mis-statement in terms of civil and criminal consequences.

9. Non company issuers are also to be included in the regulatory net.

10. Parallel action under the SEBI Act can be also taken in case of mis-statements in offer documents and action is not confined to mis-statement in prospectus, under Companies Act.

11. Provision has been made for establishment of a clearing corporation and the regulation thereof.

12. Provision has been made for recovery of the listing fees. Directors or persons in management are personally liable for payment of listing fees which can be recovered as land revenue from the issuer, management in case of default.

13. Parameters are prescribed for delisting of securities. Voluntary de-listing to be permitted by stock exchanges and SEBI only with the consent of the prescribed majority of the shareholders and also upon specific conditions.

14. Provisions regarding contracts and options in securities are streamlined.
 
14.1 - Hence, dealing in securities may take place in any of three ways.
 

16. Compulsory dematerialisation for new issue of securities exceeding rupees 10 crores in value.

17. UTI to be regulated as a Mutual Fund notwithstanding the provisions of UTI Act, 1963.

18. New Chapter inserted for empowering SEBI and its officials for Investigation and Enforcement on lines of other economic legislations including powers, examination of persons, search and seizure, etc.

19. Provision inserted to take approver, evidence and to offer consequential immunity for prosecution.

20. To prevent abuse of power necessary safeguards for prevention of vexatious searches, draconian exercise of powers provided for. SEBI to follow settled principles of administrative law subject to judicial review.

21. Provisions as to penalty and adjudication are rationalised.

22. New categories of penalties for mis-statement in offer documents and other documents. In relation to offences of insider trading and unfair trade practices, persons who knowingly benefit are also liable for penalty.

23. Provisions related to a single Appellate Authority i.e. Securities Appellate Tribunal has been rationalised.