SCRA (Security Contract Regulation Act)

In addition, under Section 28A of the Securities Contracts Regulation Act (SCRA) inserted by the SEBI Act, the Government may delegate powers exercisable by it also to the SEBI, subject to such limitations/condition as may be stipulated by the Government. While delegating the powers to the SEBI, the Government may retain the power in relation to any matter under the Act. In respect of the following matters, the SEBI has been authorized to exercise powers under the SCRA which were formerly exercised by the Government:

1. Call of periodic returns stock exchanges;
2. Prescribe maintenance of certain documents by the exchanges.
3. Call upon the exchange/any member(s) to furnish explanation/information relating to the affairs of the exchange/any member(s) and appoint any person to conduct an inquiry into the affairs of the governing body of any exchanges/any member of the exchange.
4. Approve byelaws of the exchange (s) for regulation and control of contracts;
5. Licensing of dealers in securities in certain areas; and
6. Compel a public company to, list its shares.

In the exercise of its powers under Section 29A of the SCRA, the Government delegated the following powers to the SEBI with effect from July 30, 1992:

1. Amendment of rules relating to matters specified in Section 3(2) of the Act;
2. Furnishing of annual report by recognized stock exchanges.
3. Directions to stock exchanges in general or a stock exchange in particular to make rules or to amend rules;
4. Superseding the governing body of a recognized stock exchange.
5. Suspension of business of a recognized stock exchange and
6. Prohibit contracts in certain cases

More powers have been delegated with effect from September 13, 1994. These powers are:

1. Submission of applications of the recognition of stock exchanges;
2. Grant of recognition to stock exchanges;
3. Withdrawal of recognition of stock exchange;
4. Making or amending rules or articles of association of a stock exchange regarding voting rights of members of a stock exchange at any meeting;
5. Issue of notification declaring Section 13 to apply to an area, consequent upon with contracts issued in that area, otherwise than between members of a recognized stock exchange or through or with such members would be illegal;
6. Regulations and control of the business of dealing in spot delivery contracts;
7. Hearing appeals submitted by companies against refusal of a stock exchange to list their securities and
8. Issue of a notification specifying any class of contracts as contracts to which the SCRA or nay provision contained therein would not apply.

With these delegations, the SEBI is now exercising most of the powers under the SCRA.

Registration of Intermediaries:

All intermediaries dealing in securities are compulsorily registered with the SEBI in accordance with the regulations made under the SEBI Act. The certificate of registration contains the conditions/rules and regulations for conduct of business by the security market intermediaries. The SEBI prescribes regulations for the application form and the manner of making an application as well as the fee payable. The SEBI can suspend/cancel a certificate of a registration granted to the intermediaries in accordance with the regulations made by it on this behalf. An intermediary/person aggrieved by an order of the SEBI, suspending/canceling registration can prefer an appeal to the Government. By various regulations notified from time to time, the SEBI has prescribed the procedure for registration of various intermediaries associated with the securities market.

Directions from Government:

The Government of India can issue directions to the SEBI on questions of policy in writing from tem to time. It is bound to follow and observe such directions in the exercise of its powers/the performance of its functions. The government has absolute discretion to determine whether a question is one of policy or not. Its inability to discharge its functions/duties, or non-compliance to follow and act upon direction given by the Government or requirements in the public interest may lead to its super-session by the Government.

Power to make rules and regulations:

The government is authorized to make rules for carrying out the purpose of the SEBI Act. The important matter for which rules may be framed, include, the additional functions to be performed by it, its constitution, maintenance of its accounts, manner of inquiry to impose penalty for defaults, constitution of the Securities Appellate Tribunal (SAT), the forms of appeal and fee before the SAT, the form in which reports have to be submitted to the government.

To carry out its functions, the SEBI is empowered to make regulation. Every regulations made by it must have the prior approval of the Government.