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Developmental Functions of SEBI:

(i) It trains intermediaries of the securities market.

(ii) It conducts research and publishing information useful to all the market participants.

(iii) It undertakes measures to develop the capital markets by adapting a flexible approach.

Regulatory functions of Securities and Exchange Board of India are:

(i) It registers brokers and sub-brokers and other players in the market.

(ii) It registers collective investment schemes and mutual funds.

(iii) It regulates stock brokers, portfolio exchanges, underwriters and merchant bankers.

(iv) It regulates takeover bids by, the companies.

(v) It calls for information by, undertaking inspection, conducting enquiries and audit of stock exchanges and intermediaries.

(vi) It levies fee or other charges for carrying out the purposes of the SEBI A/C, 1992.

(vii) It performs and exercises such power under Securities Contract (Regulation) Act 1956 as may be delegated by the government of India.

Registration of Collection Investment Schemes and Mutual Funds.

A commercial bill can be discounted with the banker before its date of maturity which is called as banker’s acceptance.

These are short term, unsecured negotiable instrument in bearer form issued by the commercial banks.

The National Stock Exchange is the latest, most modern and technology-driven exchange. NSE has set up a nationwide fully automated screen-based trading system. The NSE was set up by leading financial institutions, banks, insurance companies, and other financial intermediaries. It is managed by professionals, who do not directly or indirectly trade on the exchange. The trading rights are with the trading members who offer their services to the investors. The Board of NSE comprises senior executives from promoter institutions and eminent professionals, without having any representation from trading members. 

Objectives of NSE:

a. Establishing a nationwide trading facility for all types of securities. 

b. Ensuring equal access to investors all over the country through an appropriate communication network. 

c. Providing a fair, efficient and transparent securities market using electronic trading sys-tern. 

d. Enabling shorter settlement cycles and book entry settlements, (v) Meeting international benchmarks and standards.

Within a span of 10 years, NST Was able to achieve its objectives for which it was set up. It has been playing a leading role as a change agent in transforming the Indian capital market.

1. False

2. False

3. True

4. True

5. True

6. False

7. False

i. Brokerage and
ii. Underwriting Commission.

Correct option: (b) Financial securities

1. Financial Market

2. Capital Market

3. Money Market

4. Call Money

5. Treasury Bill

6. Primary Market

Marketing functions include a series of specialised activities performed on the marketing of goods and services.

(a) Market Planning: This is concerned with the development of appropriate marketing plans to achieve the marketing objectives of an organisation. This includes making a comprehensive action programme covering all the important aspects of the plan.

(b) Product Designing and Development: Another important marketing activity is related to the product designing and developing in such a way so as to attract the targeted customers. The product design should be such, which improves the performance of a product or gives it a competitive edge over its competitors.

• The securities issued earlier are traded in the secondary market.
• It is the market where existing securities are resold or traded.
• Only listed securities can be dealt with in the secondary market.

(a) Protective function.

(b) (i) Welfare of the investors.

(ii) Building trust of the investors in stock exchange.

Trade Bills/Commercial Bills:

• Bill of Exchange also called Trade bills are negotiable instruments or bills drawn by a seller on the buyer for the value of goods sold under credit sales.
• These have a short-term maturity period, generally of 90 days, and can be easily transferred.
• If the seller wants immediate cash, he can discount the trade bills with Commercial banks.

• It is a component of the financial market where short-term borrowing takes place.
• In the money market, the instruments are traded for not more than one year.

e-IPO (Electronic-Initial public Offer)

It is an agreement where the seller of security (i.e. one who needs money) agrees to buy it back from the lender at a higher price on a future date. Usually, this agreement is between RBI and commercial banks. RBI uses this agreement to control the money supply in the economy. These agreements are the most liquid of all money market investments having maturity ranging from 24 hours to several months.

Correct option is (C) Board of Directors

(a) As Mr. X wants to invest for a short period with the amount of Rs. 5 lakhs, then he should buy a certificate of deposit.

(b) If he needs money back in 4 months, then he should invest in Treasury bills with the option of 91 days Maturity.

(c) PQR Company Ltd. is a construction company. Hence it cannot issue a certificate of deposit as it can be issued by commercial banks and financial institutions only.

By providing adequate and authentic information on a regular basis and regulating the activities of stock exchange and brokers.

In India, a company registered under Companies Act, can perform function as depository. Depository has to obtain certificate of registration from SEBI before starting its operations. The primary function of depository is to convert securities from physical form into electronic form and to maintain the same in electronic form.

At present there are two depositories in India:

1. NSDL – National Securities Depository Limited and
2. CDSL – Central Depository Services (India) Limited.

Meaning and Explanation: Secondary Market – Stock Exchange:

The oldest and first stock exchange of India is Bombay Stock Exchange. Stock exchange is an organization which provides facility to buy and sell securities.

Central Depository Services Limited

• Central Depository Services (India) Limited (CDSL) is the second electronic depository of India.
• It was established in 1999 in Mumbai with collaboration of Bombay Stock Exchange and some banks.
• Just like NSDL, CDSL provides online depository services all over India. It aims at easy and safe services to the investors.
• It publishes the list of its registered depository participants time to time on its website.

It is a market for the purchase & sale of second hand or existing securities. This market creates liquidity & easy marketability to the securities.

• A Depository helps in converting physical certificates into electronic holding. 
• It enables e-trading to investors.

NSDL (National Securities depository Account) CDSL (Central Depository Service Limited)

Depository participant: Intermediaries or agents that provide depository services on behalf of depositories to the customers are called depository participant (DP).

Banks, financial institutions, share broker, etc. can work as a Depository Participant.

Functions (services) of the depositories:

• Convert physical shares (paper format) into electronic format (dematerialized format).
• Keep deposit of these securities in electronic form i.e. preserve them.
• Transfer the ownership of shares from one investor’s account into another when the two investors involve in buying and selling.

• Before the electronic system of trading came, share brokers used to gather in the stock exchange of India at a fixed time.
• They used to conduct transactions on the floor through outcry and with the different signs of hands.
• Now, online screen based electronic trading has come into existence in place of old traditional system.
• All the stock exchanges of India now allow only online trade.
• National Stock Exchange (NSE) and over-the-counter exchange have adopted screen based online trading system right from their inception.
• Bombay Stock Exchange (BSE) and National Stock Exchange have introduced fully self-automated screen based trading system all over the nation.
• The screen based trading system of National Stock Exchange is known as NEAT (National Exchange for Automated Trading). Screen based trading system of Bombay Stock Exchange is known as BOLT i.e. BSE Online Trading.
• Due to the internet based trading services of these exchanges, investors can buy and sell their securities online.

Characteristics of capital market:

• Capital market is a market for raising long term capital fund.
• Instruments of capital market include government securities, debt instruments, securities of industrial enterprises like shares and debentures.
• Investment of fund is in long term securities.
• In India, capital market is strictly regulated by Securities and Exchange Board of India (SEBI).
• Ownership of shares and debentures is easily transferrable.
• Provides liquidity to financial assets (securities).
• Capital market is divided into two parts:
  1. Primary market and
  2. Secondary Market

Correct option is (A) Banker

Characteristics of money market:

1. Money market is divided into two parts. They are:
   (a) Organized money market and
   (b) Unorganized money market.
2. Money market is a market for short term assets or instruments, whose maturity period is one year or less.
3. Credit worthiness of participants in money market is important so that both the borrower and lender can trade at ease.
4. Money market is not a fixed physical location but a collective structure of various institutions like Reserve Bank of India, commercial banks, financial institutions, mutual funds, insurance companies, indigenous bankers, shroffs, etc.
5. It is a market of financial instruments which can easily be converted into cash (i.e. are highly liquid). For example, treasury bills, call money, etc.
6. Sub-branches of money market also develop with economic and technological development, such as call money market, bond market, treasury bills market, etc.
7. Most of the financial instruments are debt instruments. Element of risk is less as compared to other financial instruments.
8. The success and operation of money market depends on the banking system and financial institutions.

Correct option is (A) Banker

Correct option is (C) RBI

Allocative function.

• A capital market (locally – share market) is an organized market in which capital is raised by the investment made by general public in the form of shares, debentures, bonds, etc.
• When companies issue equity shares in the market, investors buy them. The money invested becomes the capital for the company who issued the shares. So, the companies and industries get fund through the savings of general public.

Capital market is divided into two markets. They are:

1. Primary market and
2. Secondary Market

• Capital market is a source of long term capital fund for industrial enterprises.
• Long term securities like shares and debentures are traded in capital market.
• Capital market is a market for all types of securities including industrial securities and government securities.
• Since this market mobilizes savings of the community, it boosts economic growth.

Money market:

• Money market refers to a section of financial market where financial instruments (assets) with high liquidity and short-term maturities are traded. It is a market for assets or instruments which are close substitutes for money.
• Financial assets traded in money market include treasury bills, certificate of deposits, call money, money via. money lenders, pawn, indigenous bankers, shroffs, etc.
• Money is borrowed and lent for a short term. Securities or financial assets having a maturity period of one year or less are traded in this market.
• It is important to note that unlike stock exchange, money market is not a physical location, but group of various institutions trading or dealing in money.
• Transaction takes place between two parties. One is lender and the other is borrower.
• Reserve bank, commercial banks, co-operative banks, shroffs, etc. are mainly included in the group of money lenders, while individuals, business enterprises,
  farmers, traders, state governments, central government are the borrowers of money.

1. De-materialisation: It is a process where securities held by the investor in physical form are cancelled and the investor gives an electronic entry or number so that she/he can hold it as an electronic balance in an account.

2. Problems with dealing in physical form:

i. Theft

ii. fake/forged transfer.

Financial market is mainly classified into two parts. They are:

1. Capital market and
2. Money market.

On the basis of maturity period, capital market is further classified in two markets. They are:

1. Primary market and
2. Secondary market.

On the basis of term of maturity, financial market can be classified into:

1. Money market:

Money market is a market of short term securities such as treasury bills, commercial papers, etc.

2. Capital market:

• Capital market is a market of long term securities such as shares, debentures, bonds, etc.
• Capital market is further divided into two parts:
  1. Primary market and
  2. Secondary market.

Financial market:

• The market that deals with financial securities (or instruments) and financial services is called financial market.
• Financial transactions related to finance such as issue of equity shares by a company, purchase of shares and bonds in the secondary market, depositing money in bank account, etc. take place in the financial market.

On the basis of term of maturity, financial market can be classified into:
1. Money market:

Money market is a market of short term securities such as treasury bills, commercial papers, etc.

2. Capital market:

• Capital market is a market of long term securities such as shares, debentures, bonds, etc.
• Capital market is further divided into two parts:
  1. Primary market and
  2. Secondary market.
• When a company publicly sells new stocks or securities and bonds for the first time in the market, the market is called the primary capital market. So, primary capital market is the market of newly issued securities.
• The secondary market is the market in which securities such as shares (stock), bonds, etc. which were originally issued in the primary market can be purchased and sold (traded/exchanged). The secondary market is also called the stock exchange.
• Based on the condition of the financial market, investors can decide when and where they should invest their savings.

Participants:

Following participants participate for trading in the of capital market:

1. Issuers of various type of securities, i.e. borrowers of money
2. Purchasers of securities i. e. financiers
3. Financial intermediaries, i. e. financial institutions

Functions of SEBI that are performed in the above case are the following:

i. Regulatory Function: “On regular inspection and by conducting enquiries of the brokers involved, securities and exchange board of India (SEBI) was able to detect this irregularity.’’

Regulatory function refers to those functions performed by SEBI which regulate the business in stock exchange.

ii. Protective Function: “The SEBI imposed a heavy penalty on Mr. Sanjay Nehra.” Protective Function refers to those functions performed by SEBI which protect the interest of investors and provide safely to investment.

Ensures safety of funds. & Evaluation of securities.

It refers to the market that creates and exchanges financial assets.

Correct option is (A) Depository Act, 1996

Stock exchange are organized auction markets where buyers & sellers come together through their brokers to effective transactions in securities admitted to listing on the exchange.