MAIN REGULATOR OF STOCK MARKET
Securities and Exchange Board of India (SEBI)
a. Controls stock market in India
b. Protects investors from fraud
c. Regulates Bombay Stock Exchange and National Stock Exchange
d. Creates rules for companies, brokers, traders
IMPORTANT STOCK MARKET LAWS (INDIA)
1. SEBI ACT, 1992
PURPOSE
a. Establish SEBI authority
b. Protect investor interests
c. Prevent unfair practices
KEY POWERS
a. Ban companies or brokers
b. Investigate fraud
c. Impose penalties
2. SECURITIES CONTRACT (REGULATION) ACT, 1956 (SCRA)
PURPOSE
a. Control stock exchanges
b. Regulate trading activities
MEANING
a. Only approved exchanges like NSE/BSE can operate
b. Illegal trading platforms are banned
3. COMPANIES ACT, 2013
PURPOSE
a. Rules for company management
b. Financial transparency
KEY POINTS
a. Mandatory financial reporting
b. Protect shareholders
c. Prevent company fraud
4. DEPOSITORIES ACT, 1996
PURPOSE
a. Digital share holding (Demat system)
MEANING
a. No physical share certificates
b. Safe electronic storage
5. PREVENTION OF MONEY LAUNDERING ACT (PMLA), 2002
PURPOSE
a. Stop illegal money in stock market
MEANING
a. KYC is mandatory
b. Suspicious transactions tracked
IMPORTANT SEBI REGULATIONS (SECTIONS & RULES)
1. INSIDER TRADING REGULATIONS (2015)
MEANING
a. Using secret company info to trade = illegal
EXAMPLE
a. Company insider buys shares before good news
PUNISHMENT
a. Heavy fine
b. Market ban
2. PROHIBITION OF FRAUDULENT & UNFAIR TRADE PRACTICES (PFUTP)
MEANING
a. Prevents manipulation and cheating
EXAMPLES
a. Fake news to increase price
b. Pump and dump scams
3. LISTING OBLIGATIONS & DISCLOSURE REQUIREMENTS (LODR)
MEANING
a. Companies must share true information
RULES
a. Quarterly results
b. Major announcements
4. STOCK BROKER REGULATIONS
MEANING
a. Brokers must register with SEBI
RULES
a. Follow compliance
b. Protect client funds
COMMON STOCK MARKET FRAUDS & SCAMS
1. PUMP AND DUMP SCAM
a. Artificial price increase
b. Sell at high → others lose
2. INSIDER TRADING
a. Illegal use of private info
3. FAKE TIPS / TELEGRAM SCAMS
a. Guaranteed profit signals
b. Mostly fraud
4. UNREGISTERED ADVISORS
a. Giving advice without SEBI license
5. IPO FRAUDS
a. Fake company listings
HOW TO FILE COMPLAINT (STEP BY STEP)
1. SEBI SCORES PLATFORM
SEBI Complaints Redress System
a. Online complaint system
b. Register complaint easily
2. STEPS TO COMPLAINT
STEP 1
a. Collect proof (transaction, messages)
STEP 2
a. Visit SCORES website
STEP 3
a. Submit complaint
STEP 4
a. Track complaint status
3. OTHER OPTIONS
a. Contact broker customer care
b. File complaint with NSE/BSE
c. Legal case in court
PUNISHMENT FOR FRAUD (INDIA)
1. FINES
a. Lakhs to crores
2. MARKET BAN
a. No trading allowed
3. IMPRISONMENT
a. Serious fraud → jail
INVESTOR PROTECTION RULES
1. KYC VERIFICATION
a. Identity proof required
2. SEGREGATION OF FUNDS
a. Broker cannot misuse money
3. TRANSPARENCY
a. Clear pricing and charges
BEST SAFETY TIPS (IMPORTANT)
1. CHECK SEBI REGISTRATION
a. Verify broker/advisor
2. AVOID GUARANTEED RETURNS
a. No one can guarantee profit
3. USE OFFICIAL APPS ONLY
a. Avoid unknown platforms
4. DO YOUR OWN RESEARCH
a. Never depend fully on tips
REAL EXAMPLE (SCAM HISTORY)
Harshad Mehta SCAM (1992)
a. Stock price manipulation
b. Banking loopholes used
c. Led to strict SEBI rules
FINAL SUMMARY
LEGAL SYSTEM FLOW
a. SEBI → Controls market
b. NSE/BSE → Trading platforms
c. Brokers → Execute trades
d. Investors → Buy/sell shares
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