NISM Chater - 6:Introduction to the trading system

Key Points:

Regulatory framework:

The Securities and Exchange Board of India(SEBI) is the principal regulator of India’s securities market and is charged with the protection of investors and the maintenance of market integrity.

Key laws are the SEBI Act — of 1992, the SecuritiesContracts (Regulation) Act — of 1956 and the Companies Act — of 2013.

Investor protection:

SEBI strengthens the trust of investors by requiring responsiveness and fairness through the use of robust mechanisms.

The emphasis is placed on fraud management and prevention and the proper disclosures and measures to protect the client's interests.

Code of Conduct for Intermediaries:

All market intermediaries including brokers and asset managers have a conduct code with specific requirements to protect the ethical conduct of their business and show clear business practices.

Compliance responsibilities:

The regulated entities including brokers and exchanges among others are required to adhere to provisions of the law and report true information and core documents.

Internal auditing and compliance with SEBIset processes are given as compulsory.

Surveillance and enforcement:

SEBI uses surveillance as an instructive tool aimed at seeking out and preventing the occurrence of a range of market abuse and other violations.

It carries out investigations on complaints of irregularities and where necessary levies the penalties.

Self regulatory organizations(SROs):

After the state regulatory bodies, it’s the turn of stock exchanges and industry associations, which are also important for providing compliance with regulatory requirements.

Conclusion:

Chapter 6 brings attention to the aspect of regulation and compliance as the key drivers of the functioning of the securities market in a fair, transparent and efficient manner. It also underlines the importance ofSEBI, the provisions of the law and the responsibilities of the market participants in achieving the objectives of investor protection and sustenance of market integrity.