SEBI Act and LODR Regulations

The SEBI portion of Set A rewards precision. Questions are drawn from the powers listed in Sections 11 to 15 of the SEBI Act, and from the numbered regulations of LODR. Learn the regulation numbers alongside the substance — a large share of the marks turns on identifying which regulation, not on explaining it.

Part 1Chapter-wise quick notes

SEBI Act, 1992 — constitution and powers

• SEBI was established on 12 April 1988 as a non-statutory body and given statutory status by the SEBI Act with effect from 30 January 1992.
• Three-fold mandate: protect the interests of investors, promote the development of the securities market, and regulate the securities market.
• Board composition Sec 4 — a Chairman, two members from the ministries dealing with finance and law, one member from RBI, and five other members of whom at least three are whole-time.
• Sec 11 — Functions of the Board. Includes regulating business in stock exchanges, registering and regulating intermediaries, prohibiting fraudulent and unfair trade practices, prohibiting insider trading, and conducting inspections and inquiries.
• Sec 11(3) — SEBI has the same powers as a civil court under the Code of Civil Procedure in respect of discovery, summoning witnesses, inspecting books, and issuing commissions.
• Sec 11AA — Definition of collective investment scheme.
• Sec 11B — Power to issue directions and levy penalty.
• Sec 11C — Power of investigation.
• Sec 12A — Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control.
• Sec 15A to 15HB — Penalties for specific defaults.
• Sec 15J — Factors to be considered by the adjudicating officer: disproportionate gain or unfair advantage, loss caused to investors, and the repetitive nature of the default.
• Sec 15T — Appeal to the Securities Appellate Tribunal within 45 days of receipt of the order.
• Sec 15Z — Appeal from SAT to the Supreme Court within 60 days, on a question of law.
• Sec 24 — Contravention punishable with imprisonment up to 10 years, or fine up to ₹25 crore, or both.

Penalty landmarks under the SEBI Act

LODR Regulations, 2015 — board and committees

• Reg 17 — Board of Directors. Optimum combination of executive and non-executive directors with at least one woman director; the top 1,000 listed entities by market capitalisation require at least one independent woman director. Where the chairperson is a non-executive director, at least one-third of the board must be independent; where the chairperson is an executive director or a promoter, at least half. Minimum four board meetings a year with a gap of not more than 120 days.
• Reg 18 — Audit Committee. Minimum three directors, with two-thirds being independent. All members financially literate and at least one having accounting or related financial management expertise. Minimum four meetings a year with a gap of not more than 120 days. Quorum is two members or one-third, whichever is greater, with a minimum of two independent directors.
• Reg 19 — Nomination and Remuneration Committee. At least three directors, all non-executive, with at least two-thirds independent. Must meet at least once a year.
• Reg 20 — Stakeholders Relationship Committee. Chaired by a non-executive director; must meet at least once a year.
• Reg 21 — Risk Management Committee. Applicable to the top 1,000 listed entities by market capitalisation. Must meet at least twice in a financial year with a gap of not more than 180 days.
• Reg 25 — Independent directors. Maximum tenure of two consecutive terms of up to five years each. At least one meeting of independent directors a year without the presence of non-independent directors and management.

LODR — disclosure and filing timelines

• Reg 29 — Prior intimation to the stock exchange of board meetings: at least two working days in advance for financial results, and eleven working days for proposals such as alteration in the nature of securities or a buy-back.
• Reg 30 — Disclosure of material events. Events disclosed within 12 hours where they emanate from within the listed entity, and within 24 hours where they emanate from a decision at a board meeting held outside trading hours.
• Reg 31 — Shareholding pattern, filed within 21 days of the end of each quarter.
• Reg 33 — Financial results, filed within 45 days of the end of each quarter. Annual audited results within 60 days of the end of the financial year.
• Reg 34 — Annual report to be submitted to the stock exchange.
• Reg 27 — Corporate governance compliance report, filed within 21 days of the end of each quarter.
• Reg 23 — Related party transactions. A transaction is material if it exceeds ₹1,000 crore or 10% of annual consolidated turnover, whichever is lower. Material RPTs require prior approval of shareholders, and related parties may not vote.
• Reg 24 — Corporate governance requirements with respect to subsidiaries. An independent director of the listed entity to be a director on the board of a material subsidiary (one whose income or net worth exceeds 10% of the consolidated figure).

Insider trading and takeover thresholds

• PIT Regulations, 2015 — Unpublished price sensitive information means information relating to a company or its securities, not generally available, which upon becoming generally available is likely to materially affect the price. Includes financial results, dividends, change in capital structure, mergers and demergers, and changes in key managerial personnel.
• Trading window closure and the requirement for a structured digital database of persons with whom UPSI is shared.
• SAST Regulations, 2011 — Open offer triggered on acquisition of 25% or more of voting rights, or on acquisition of control irrespective of shareholding. Open offer size is a minimum of 26% of the total shares.
• Creeping acquisition — a holder between 25% and the maximum permissible non-public shareholding may acquire up to a further 5% in a financial year without triggering an open offer.
• Disclosure thresholds: acquisition or disposal crossing 5% requires disclosure, and every change of 2% thereafter for a holder above 5%.
• Minimum public shareholding is 25% for a listed company.

Part 2Repeated questions

Part 3Recall rail