2(h)

Securities — definition

Shares, bonds, derivatives, government securities, CIS units, any CG-notified instrument — INCLUSIVE definition

3

Recognition of stock exchanges

CG grants recognition; conditions; SEBI has CG's powers under Section 29A

13

Prohibition of contracts

Spot delivery + CG-notified contracts only — all other contracts prohibited unless on recognised exchange

16

Powers of CG/SEBI over exchanges

Inspect, supersede boards, withdraw recognition; SEBI exercises CG's powers

18A

Derivatives — legality

Derivatives contracts on recognised exchanges are legal; off-exchange derivatives contracts are void

22

Appeal against listing refusal

Appeal to SAT against exchange's refusal to list securities

23(1)

Criminal penalty

₹25 crore OR 3× profit (whichever higher) + 10 years imprisonment

26

Cognizance restriction

Only SEBI-authorised written complaint can trigger criminal proceedings

11(1)

SEBI's duty

Statutory duty: protect investors + promote development + regulate securities market

11(4)

Impounding power

SEBI can impound/retain proceeds or securities under investigation

11A

Regulate capital issues

SEBI regulates issue of capital + disclosure requirements — basis for ICDR Regulations

11B

Directions

SEBI can issue cease & desist, debarment, disgorgement, impounding, refund orders

11C

Investigation

SEBI appoints IA; civil court powers; mandatory cooperation under 11C(7)

12

Registration of intermediaries

Mandatory registration; fit and proper; suspension/cancellation after inquiry

12A

Prohibitions

(a)-(c) fraudulent practices (PFUTP); (d)-(f) insider trading (PIT)

15G

PIT penalty

₹10 lakh min; ₹25 crore OR 3× profit max

15H

SAST penalty

₹25 crore OR 3× profit

15HA

PFUTP penalty

₹25 crore OR 3× profit

15HB

Catch-all penalty

₹1 crore — any violation without specific section

15I

Adjudicating Officer

Not below Division Chief rank; civil court powers; hear before imposing penalty

15J

Penalty factors

MANDATORY: (a) disproportionate gain; (b) investor loss; (c) repetitiveness

15K

SAT establishment

CG establishes SAT

15T

SAT jurisdiction

Appeals against SEBI, IRDAI, PFRDA orders — 45 days

15X

No auto stay

Filing SAT appeal does NOT automatically stay SEBI order

15Z

SC appeal

Appeal from SAT to Supreme Court — questions of law only

24

Criminal penalty

10 years imprisonment + fine

26A

Cognizance restriction

Only SEBI written complaint — no private criminal complaints

2(a)

Beneficial owner

Person whose name is recorded as such with a depository — the investor

2(e)

Depository

SEBI-registered company (Section 12(1A) SEBI Act) — NSDL or CDSL

2(g)

Participant/DP

SEBI-registered person providing depository services — agent of depository

3

Commencement certificate

Depository needs SEBI certificate to begin operations — two-stage process

4

Issuer-depository agreement

Issuer must agree with depository to allow dematerialisation

8

Dematerialisation trigger

Investor surrenders certificate → issuer cancels → depository becomes registered owner

9

Depository as registered owner

For transfer purposes only; NO voting rights; beneficial owner has all rights

9A

Fungibility

Demat securities are fungible — no distinctive numbers; ISIN-based

9B

Free transferability

Notwithstanding any law or contract — demat securities freely transferable

10

Beneficial owner's rights

Beneficial owner has ALL rights + ALL liabilities — dividends, voting, bonus

11

Pledge/hypothecation

Beneficial owner can pledge demat securities with depository approval; depository liable for failures

16(1)

Liability

Depository and DP each liable for their own negligence causing loss to BO

16(2)

Subrogation

Depository can recover from DP if it compensates BO for DP's negligence

20

Criminal penalty

10 years + ₹25 crore fine

22

Cognizance restriction

Only SEBI-authorised written complaint

Reg 2(1)(c)

Fraud

Broad definition — 10 sub-clauses; deceit OR NOT deceit; wrongful gain OR NOT; covers omissions, reckless statements, fund diversion, manipulation

Reg 2(1)(e)

Fraudulent practice

Includes market manipulation, misleading appearance, false market, impersonation, illusion of trading, false information

Reg 2(1)(g)

Misleading appearance

Appearance not reflecting genuine supply and demand forces

Reg 3

Connected person prohibition

(a) dealing on UPSI; (b) communicating UPSI; (c) inducing trading on UPSI

Reg 4(2)(a)

False/misleading appearance

Circular trading, wash sales — most tested PFUTP provision

Reg 4(2)(e)

Disseminating false info

Pump-and-dump information — ANY medium including social media/WhatsApp

Reg 4(2)(q)

Front running

Dealing ahead of anticipated client orders

Reg 5

Investigation

Suo motu or on complaint; 'suspected' threshold

Reg 6

IA powers

Civil court powers under CPC

Reg 10

Recovery

Recoverable as arrear of land revenue

Reg 2(1)(a)

Acquirer

Direct/indirect acquisition; agrees to acquire; with PAC

Reg 2(1)(e)

Control

Right to appoint majority directors OR control management/policy — through shareholding, agreements, voting, 'in any other manner'

Reg 2(1)(q)

PAC

Common objective + formal OR informal agreement + co-operation for acquisition/control

Reg 3(1)

25% trigger

Acquirer+PAC reaches 25% → mandatory open offer regardless of method

Reg 3(2)

Creeping acquisition

25%-74.99% holders: up to 5% per FY through OPEN MARKET ONLY; no block deals

Reg 4

Control trigger

'Notwithstanding Regulation 3' — acquiring control → mandatory open offer

Reg 6

Voluntary open offer

For 25%-74.99% holders only; min 10%; 52-week look-back; post-offer 6-month restriction

Reg 7

Offer size

Minimum 26% of total shares

Reg 8(1)

Offer price

Highest of: (a) negotiated; (b) 52-week VWAP; (c) 26-week highest; (d) 60-day VWAP

Reg 10(1)(a)

Inter-se transfer exemption

Between promoters/promoter group; 3-year holding; no external consideration

Reg 13

PA timing

Within 2 working days of triggering event

Reg 28

Annual disclosure

5%+ holders + all promoters → by April 7 (7 WD of March 31)

Reg 29

Event disclosure

2% change → within 2 WD; reaching 5% → within 2 WD

Reg 2(1)(d)

Connected person

Associated in ANY capacity within 6 months — directors/KMP/employees/advisers/relatives — six-month look-back

Reg 2(1)(e)

GAI

Accessible to public on non-discriminatory basis — exchange filing = GAI

Reg 2(1)(g)

Insider

Connected person OR any person in possession of UPSI — EITHER qualifies

Reg 2(1)(n)

UPSI

Company/securities specific + not GAI + likely to materially affect price — inclusive list

Reg 3(1)

Communication prohibition

No insider shall communicate/provide/allow access to UPSI — except legitimate purpose

Reg 3(3)

Legitimate purpose

UPSI may be shared for legitimate purpose — NDA; aware it is UPSI; no trading; SDD entry

Reg 3(5)

SDD

Mandatory for every listed company + every intermediary — time-stamped; tamper-proof; 8-year retention

Reg 4(1)

Trading prohibition

No insider shall trade while in possession of UPSI

Reg 4(1) Explanation

Reversal of burden

Connected person + UPSI + trade = DEEMED to have traded on basis of UPSI

Reg 5

Trading plan

Irrevocable; 6-month cooling-off; publicly disclosed; made without UPSI

Schedule B

Listed company Code

CO designation; trading window; pre-clearance; SDD; trade reporting

Schedule C

Intermediary Code

Chinese walls; independent compliance function; SDD

Critical Numbers: 25% (SAST trigger) | 26% (open offer) | 5% per FY (creeping) | 10% (voluntary offer min) | 45 days (SAT limitation) | 48 hrs (trading window) | 6 months (PIT look-back / trading plan cooling-off) | 8 years (SDD retention) | 3 (SAST Section 15J factors)

25%

SAST mandatory open offer trigger (Acquirer + PAC)

SAST Regulation 3(1)

26%

Minimum mandatory open offer size

SAST Regulation 7(1)

10%

Minimum voluntary open offer size

SAST Regulation 6(2)

5%

Creeping acquisition annual limit; SAST disclosure trigger

SAST Regs 3(2), 28-29

74.99%

Maximum permissible non-public shareholding (creeping ceiling)

SAST Regulation 3(2)

2 WD

PA timing after SAST trigger; SAST event disclosure; PIT trade reporting

SAST Reg 13; SAST Reg 29; PIT Reg 7

7 WD

DPS timing (SAST); annual disclosure deadline (April 7 = 7 WD of March 31)

SAST Reg 14; SAST Reg 28

45 days

SAT limitation period for appeal from SEBI order

Section 15T SEBI Act

48 hours

Trading window re-opening after UPSI becomes GAI

PIT Schedule B Code of Conduct

6 months

PIT connected person look-back; SAST post-voluntary-offer restriction; PIT trading plan cooling-off

PIT Reg 2(1)(d); SAST Reg 6(4); PIT Reg 5

52 weeks

SAST voluntary offer look-back; SAST offer price VWAP of prior acquisitions

SAST Reg 6(3); SAST Reg 8(1)(b)

8 years

SDD retention period

SEBI Circular under PIT Reg 3(5)

₹10 lakh

Mandatory minimum civil penalty for insider trading (Section 15G)

SEBI Act Section 15G

₹25 crore OR 3×

Maximum civil penalty for IT (15G), SAST (15H), PFUTP (15HA)

SEBI Act Sections 15G, 15H, 15HA

₹1 crore

Maximum catch-all civil penalty (Section 15HB)

SEBI Act Section 15HB

10 years

Maximum criminal imprisonment (all three Acts)

SEBI Act Sec 24; SCRA Sec 23; DA Sec 20

🎯 EXAM POINTERS — Topic 71: Quick Revision Chart

• SEBI's duty (Section 11(1)): THREE mandates — protect investors; promote development; regulate market.
• Section 12A: (a)-(c) = PFUTP basis. (d)-(f) = PIT basis. Know which sub-clause applies to which Regulation.
• Cognizance restriction: Section 26A SEBI Act = Section 26 SCRA = Section 22 DA — all SEBI-written-complaint only.
• Section 15J MANDATORY factors: (a) gain; (b) investor loss; (c) repetitiveness. AO MUST consider all three.
• SAST 25% trigger → 26% offer → 5% creeping → 74.99% cap. Numbers are the most-tested in SAST MCQs.
• PIT reversal of burden: Explanation to Regulation 4(1). SAST and PFUTP have NO comparable provision.
• SDD: mandatory for listed companies AND intermediaries. 8-year retention. Time-stamped and tamper-proof.
• GAI = non-discriminatory access. Exchange filing = GAI. Selective analyst briefing ≠ GAI.
• Trading plan: irrevocable + 6-month cooling-off + publicly disclosed + made without UPSI possession.
• Fungibility (Section 9A DA) + Free Transferability (Section 9B DA): demat securities interchangeable + freely transferable — notwithstanding any other law or contract.