The Indian securities market before 1992 had the following characteristics:
• Fragmented regulation; multiplicity of administration.
• Primary markets not in the mainstream of the financial system.
• Poor disclosure in prospectus. Prospectus and balance sheet not made available to investors.
• Investors faced problems of delays (refund, transfer, etc.)
• Stock exchanges regulated through the Securities Contracts (Regulations) Act. No inspection of stock exchanges undertaken.
• FIIs also permitted to invest in unlisted securities and corporate and Government debt.
• The Depositories Act enacted to facilitate the electronic book entry transfer of securities through depositories.
• Guidelines for Offshore Venture Capital Funds announced. SEBI regulations for venture capital funds become effective.
• Stock Exchanges run as brokers clubs; management dominated by brokers.
• Merchant bankers and other intermediaries unregulated.
• No concept of capital adequacy.
• Mutual funds—virtually unregulated with potential for conflicts of interest in structure.
• Poor disclosures by mutual funds; net asset value (NAV) not published; no valuation norms.
• Takeovers regulated only through listing agreement between the stock exchange and the company.
• No prohibition of insider trading, or fraudulent and unfair trade practices.
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