Securities and Exchange Board of India (SEBI)
November 19, 1992
SMD-II/11557/92
To the President/Executives of
All the Stock Exchanges
Dear Sir,
Amendment to SC(R)A, 1956 for corporate members
We are enclosing herewith a copy of the notification issued by the Government of India on November 13, 1992 amending the Securities Contract (Regulation) Rules, 1957.
The amendment facilitates the entry of companies as defined in the Companies Act, 1956, as members to the stock exchanges subject to the conditions mentioned therein. It is requested that applications from corporate members may be called for by issuing a suitable notice in the press. The financial requirement and norms required to be specified by the Securities and Exchange Board of India under the provision of Rule 8 sub-rule 4(a) (ii) will be communicated to you shortly.
Yours faithfully,
sd/-
C.B. BHAVE
encl : a/a
Ministry Of Finance
Department Of Economic Affairs
Investment Division
New Delhi, the 13th November 1992
NOTIFICATION
G.S.R. – Whereas certain draft rules further to amend the Securities Contracts (Regulation) Rules, 1957, were published as required by sub-section (1) OF SECTION 30 OF THE Securities Contracts (Regulation) Act, 1956 (42 of 1956) in the Gazette of India, Extra ordinary Part II Section 3, Sub Section (i), dated the 2nd June, 1992 under the Notification of the Government of India in the Ministry of Finance (Department of Economic Affairs) No. G.S.R. 576 (E) dated the 2nd June, 1992 inviting objections and suggestions from all persons likely to be affected thereby before the expiry of a period of forty-five days from the date on which the copies of the Gazette of India in which the said Notification was published where made available to the Public;
And whereas the copies of the said Gazette were made available to the public on 27th June 1992;
And whereas the objections and suggestions received from the public on the said draft have been considered by the Central Government;
Now, therefore, in exercise of the powers conferred by sub-section (1) of section 30 of the said Act, the Central Government hereby makes the following rules further to amend the Securities Contracts (Regulation) Rules, 1957 namely :-
1. These rules may be called the Securities Contracts (Regulation) Amendment Rules, 1992.
2. They shall come into force on the date of their publication in the Official Gazette.
3. In rule 8 of the Securities Contracts (Regulation) Rules, 1957 after the existing sub-rule (4), the following sub-rule shall be inserted, namely :-
“4(A) A company as defined in the Companies Act, 1956 (1 of 1956) shall also be eligible to be elected as a member of a Stock Exchange if –
i. Such company is formed in compliance with the provisions of section 12 of the said Act;
ii. such company undertakes to comply with such financial requirements and norms as may be specified by the Securities and Exchange Board of India for the registration of such company under sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);
iii. majority of the directors of such company are shareholders of the company and not less than 40% of the paid-up equity capital of the company is held by these directors themselves or by the body corporate appointing them as directors on the board of such company;
iv. the directors of the company are not disqualified for being members of a stock exchange under clause (1) (except sub-clause (f) thereof) or clause (3) (except sub-clause (f) thereof) and the Directors of the company had not held the offices of the Directors in any company which had been a member of the stock exchange and had been declared defaulter or expelled by the stock exchange; and
v. not less than two directors of the company are persons who possess a minimum two years’ experience :
a. in dealing in securities; or
b. as portfolio managers; or
c. as investment consultants.”
(Y. VENUGOPAL REDDY)
JOINT SECRETARY TO THE GOVERNMENT OF INDIA
F. NO. 1/81/SE/90
DATED : 13TH NOVEMBER, 1992
The Manager,
Government of India Press
Mayapuri
New Delhi.
Ministry Of Finance
Department Of Economic Affairs
Investment Division
Press note
1. Under the existing rule 8 of the Securities contracts (Regulation) Rules 1957, a company formed in compliance with the provisions of Section 322 of the Companies Act 1956 is eligible to become a member of a Stock Exchange. The rule also requires that a majority of the directors of such a company are its shareholders and also members of a Stock Exchange and that the directors of the company, who are members of a Stock Exchange, have unlimited liability in the company. Experience has shown that the existing rule is not conducive to the growth of corporate membership in Stock Exchanges. Accordingly, Government have issued a Notification on 2nd June, 1992 containing draft of certain rules further to amend the Securities Contracts (Regulation)Rules 1957.
2. After considering the objections or suggestions on the draft rules received from the public and Stock Exchanges in consultation with the Securities and Exchange Board of India, Government have issued a Notification in the gazette of India on 13th November, 1992 amending Rule 8 of the Securities Contract (Regulation) Rules 1957 in order to provide at a company formed in compliance with the provisions of Section 12 of the Companies Act 1956 will also be eligible to become a member of a Stock Exchange subject to certain conditions. Some of the important conditions are as follows :-
i. such a company undertakes to comply with such financial requirements and norms as may be specified by the Securities and Exchange Board of India for the registration of such company under sub-section (1) of section 12 of the Securities and Exchange Board of India, Act, 1992;
11. majority of the directors of such a company are shareholders of the company and not less than 40% of the paid-up equity capital of the company is held by these directors themselves or by the body corporate appointing them as directors on the board of such company;
iii. not less than two directors of the company are persons who possess a minimum two years’ experience:
a. in dealing in securities; or
b. as portfolio managers; or
c. as investment consultants.”
3. The amendment referred to above is expected to encourage professionalism in corporate membership with limited liability of directors and thereby facilitate provision of better services to the investing public.
New Delhi
Dates 13th November, 1992
