(All about Capital markets: – Definition, Types, role of Company Secretaries etc.)

Introduction: – Capital markets are the exchange system platform that transfers capital from investors who want to employ their excess capital to businesses that require the capital to finance various projects or investments.

Types of capital Markets: – Capital markets primarily feature two types of securities – equity securities and debt securities. Both are forms of investments that provide investors with different returns and risks and provide users with capital with different obligations.

A. Equity Securities: – Equity securities are traded on the stock market and are essentially ownership shares of a business or venture. When you own equity securities of a company, you essentially own a portion of that company and are entitled to any future earnings that the company brings in.

However, the money that you invest in equity securities is not required to be paid back by the business.

B. Debit Securities: – Debt securities are traded on the bond market and are IOUs that can come in the form of bonds or notes. They essentially represent the borrowing of money that will be paid back at a later date with interest.

Interest is the required compensation that entices lenders to lend their money. The borrowers will take the money today, use it to finance their operations, and pay back the money in addition to a prescribed rate of interest at a later date.

Businessman holding a card with text CAPITAL MARKETS

Other Capital Markets: -Capital markets feature trading of other securities as well, including”:


Understanding the Role of Company Secretaries in the Capital Market

  • A Company Secretary plays a very important role in the capital market and its related compliances.
  • “The Company Secretary is the versatile Professional in securities laws and compliances. The CS is enjoined with the conduct of secretarial audit for listed companies, audit of intermediaries, and appearance before Tribunals to be set up and many more implicit and explicit areas covering wide range of issues such as compliance officer etc”.
  • The disclosure, transparency, accountability and investor protection are important for growth and development of capital market. This requires listed companies to comply with requirements under various regulations and guidelines issued by SEBI and stock exchanges. The companies accessing capital market need to have a professional who is expert in capital markets and corporate governance, in ensuring adherence to all compliances which they find in the form of a Company Secretary.
  • Company Secretaries are now more popularly known as “Governance Professionals” and are called upon to guide the corporate board on various strategic, governance-related and compliance issues related to capital markets. Broadly, CS professionals have been authorized to verify compliances and issue certificates under various securities laws, SEBI regulations and guidelines, Listing agreements, etc.

A Company Secretary has been authorized to be Compliance Officer under the following:

1. Equity Listing Agreements

2. Issue of debt securities

3. Model listing agreement for Indian Depository Receipts (IDRs)

4. Listing agreements for IDRs who are signatories to MoU of IOSCO

5. SME listing agreements

6. Various capital market intermediaries such as members of stock exchange, depository participants, mutual funds, merchant bankers, etc.

A Company Secretary has been also authorized to issue quarterly certificate to regard to reconciliation of total capital held by the depository in the DEMAT form, details of change in capital during the quarter, etc. under SEBI regulations.

Moreover, a practising Company Secretary is authorized to undertake internal audit of various capital market intermediaries such as portfolio managers, stockbrokers/trading members, credit rating agencies, depository participants, investment advisors, etc.

There is an endless list of regulatory compliances, certifications, responsibilities, etc. that a CS professional is required to understand and ensure compliance primarily under Company Law or under SEBI regulations or under listing agreements.

Now, come to our Capital Market Month theme “Envisioning the new phase of Capital Markets”.

The COVID-19 crisis is an extraordinary supply and demand shock to the global economy with far reaching and uncertain ramifications. Emerging Markets and Developing Economies (EMDEs) are highly exposed, and capital markets are one of the main transmission channels of this on-going, global, systemic shock. The private sector is highly exposed to the current crisis, especially small- and medium-sized firms.

February 19, 2020, marked the stock market peak before the outbreak of the COVID-19   pandemic triggered a free fall in share prices. In the year since, the world has changed, transforming our lives, our economies, and the fortunes of our businesses—an unfolding journey that is reflected in the ups and downs of share prices. The fundamental trends have accelerated, propelling some companies forward at record speed while for others headwinds have turned into hurricanes.

By pooling investors’ beliefs about the future, capital markets are powerful indicators of   what could lie ahead. And this view puts the new realities we face into stark relief.

For equity investors, the drama of the past year has played out in four distinct acts, reflecting marked shifts in expectations about the pandemic’s duration and its impact on consumers and businesses.

The uncertainty from COVID-19 will remain for the foreseeable future. Banks and capital markets institutions have no choice but to remain hyper vigilant and rewrite their business continuity playbooks as circumstances change. While it is reassuring to see some aggressive fiscal and monetary policy responses around the world already, clarity on how these actions will stabilize markets and accelerate the path to normalcy is slowly emerging, and in some cases yet to emerge. However, banks and their customers can take some comfort that capital ratios were the strongest going into this crisis than at any time in the last decade.

The COVID-19 crisis also poses significant operational risk, business and market continuity. Responses commonly seen so far include: regulatory relief, for example, extension of submission deadlines on financial reporting; simplification of or waiving regulatory requirements or adjustments to primary dealer and market making programs for government bond markets and business continuity plans, such as remote services.

Banks need to actively consider the immediate needs of their people and simultaneously the multiple near-, short-, and medium-term operational, financial, risk, and regulatory compliance implications. They have an opportunity to support market and economic activity and to facilitate a quick return to stability. If banks and capital markets firms respond well to these unprecedented challenges, they will not only help society, but also increase trust and the reputation of the banking industry in the long run.

A steep stock market decline across the board at the beginning of a crisis is fairly normal,  but the recovery was faster than in some previous crises”.

Peter Stumpner


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September 2021