The development in Indian securities market since 1992 can be summarized as follows:
• Capital Issues (Control) Act of 1947 repealed and the office of Controller of Capital Issues abolished; control over price and premium of shares removed. Companies now free to raise funds from securities markets after filing prospectus with the Securities and Exchange Board of India (SEBI).
• The power to regulate stock exchanges delegated to SEBI by the Government.
• SEBI introduces regulations for primary and other secondary market intermediaries, bringing them within the regulatory framework.
• Reforms by SEBI in the primary market include improved disclosure standards, introduction of prudential norms, and simplification of issue procedures. Companies required disclosing all material facts and specific risk factors associated with their projects while making public issues.
• Listing agreements of stock exchanges amended to require listed companies to furnish annual statement to the exchanges showing variations between financial projections and projected utilization of funds in the offer document and actual figures. This is to enable shareholders to make comparisons between performance and promises.
• SEBI introduces a code of advertisement for public issues to ensure fair and truthful disclosures.
• Disclosure norms further strengthened by introducing cash flow statements.
• New issue procedures introduced—book building for institutional investors—aimed at reducing costs of issue.
• SEBI introduces regulations governing substantial acquisition of shares and takeovers and lays down conditions under which disclosures and
mandatory public offers are to be made to the shareholders. Regulations further revised and strengthened in 1996.
• SEBI reconstitutes the governing boards of the stock exchanges and introduces capital adequacy norms for broker accounts.
• Private mutual funds permitted and several such funds already set up. All mutual funds allowed to apply for firm allotment in public issues—also
aimed at reducing issue costs.
• Regulations for mutual funds revised in 1996, giving more flexibility to fund managers while increasing transparency, disclosure, and accountability.
• Over-the-Counter Exchange of India formed.
• National Stock Exchange (NSE) establishment as a stock exchange with nationwide electronic trading.
• Bombay Stock Exchange (BSE) introduces screen-based trading; 15 stock exchanges now have screened-based trading. BSE granted permission to expand its trading network to other centers.
• Capital adequacy requirement for brokers enforced.
• System of mark-to-market margins introduced in the stock exchanges.
• Stock lending scheme introduced.
• Transparency brought out in short selling.
• National Securities Clearing Corporation, Ltd. set up by NSE.
• BSE in the process of implementing a trade guarantee scheme.
• SEBI strengthens surveillance mechanisms and directs all stock exchanges to have separate surveillance departments.
• SEBI strengthens enforcement of its regulations. Begins the process of prosecuting companies for misstatements and ensures refunds of application money in several issues on account of misstatements in the prospectus.
• Indian companies permitted to access international capital markets through Euro issues.
• Foreign direct investment allowed in stock broking, asset management companies, merchant banking, and other non-bank finance companies.
• Foreign institutional investors (FIIs) allowed access to Indian capital markets on registration with SEBI.
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